After the markets closed yesterday I spent some time checking my exposure and noticed that although I was technically fully invested (if every naked put I’m short is assigned), I had some good cushions on a few of my naked put positions which made me feel like I could extend my resources a little farther. I checked my balance between May and June options expirations and saw I was somewhat light for June. This got me on the hunt again, especially since the markets don’t seem to want to give up this bull run yet.
In March I sold ITRI May 70 naked puts at the money expecting Itron Inc (ITRI) to continue its upward momentum. Little did I know it would add another $10 before my puts expired. Today they announced earnings that beat estimates and the shares shot up. I still think there’s some upside left in ITRI or worst case some sideways price action from here. So I started trying to pick another strike to roll my puts out. By 9:45 ITRI was already at its high of the day at $81.00. I waited to see if it would recoil some from its opening launch. It did and I started placing limit orders good for 10 minutes. Each time one expired I’d lower my ask price and finally it hit.
I decided not to roll out my May 70 naked put since it was $10 out of the money and to just sell another naked put on top of it. While ITRI was trading at $79.99 I sold one ITRI June $80 naked put at $3.40 and received $338.99 after commissions. I could’ve gotten $3.50 with a little more patience, but the $10 wasn’t worth the risk of missing the trade. ITRI finished the day up at $80.66 and the price of the options has already dropped to $2.65/2.90 bid/ask. I’m not as confident there won’t be some profit taking before the June expiry, but with a $3.40 premium I like my chances of this turning into a profitable trade. I like ITRI on the smart grid play, so I probably wouldn’t roll this put, but would consider taking ownership of the shares. We’ll see what I think in seven weeks and a day from now.
Barron’s had a bullish article on Guess? Inc. (GES) in the Monday print edition and I’ve been watching it all week trying to decide if I should open a position on it. Minyanville agreed with Barron’s bullish outlook and I couldn’t find anything that made me doubt their stances. The one thing that made me question it more than anything else was that the premiums seemed higher than they should be for a company doing so well. It’s as if someone on the other side believes GES is ready for some profit taking more than the bulls believe in GES’ ability to keep climbing. Since GES was trading down more than $3.00 from its high on Monday and then found support at its 20 day moving average yesterday and today I decided some of the profit taking was done and this might be a good entry point. With just a few minutes to go in the trading day, while GES was trading at 47.93 I sold two GES June 45 naked puts at $1.60 each and received $318.57 after commissions. I almost sold one put at the $50 strike at $4.00, but decided to reduce my risk, especially since I’d now be on margin if everything was assigned.
By selling these puts so far out of the money and getting $1.60 for the option contracts I have close to a 9.5% cushion before this turns into a losing position. That would be a fall of almost 15% from the highs on Monday. Of course that could happen, but a fall like that might make GES a great buy, especially as it would put the stock just above its longer term trend line of higher lows. GES doesn’t announce earnings until June 7th, so this has a while to move around before we have some concrete reasons to see it change direction outside of the technicals.
I didn’t do any stupid covered call/dividend chasing today. I had to break my streak. I put some limit orders out for buy/writes below the strikes, but they didn’t hit.