Just because the market’s volatility has slowed doesn’t mean it can’t come ripping back to life in an instant. I see the markets (particularly the S&P 500) at a tipping point. The 1130 level seems to be of key significance. The SPX made it up to 1131.38 on 6/21/10, then 1128.66 on 8/4/10, 1129.25 on 8/9/10 and 1127.33 yesterday and 1126.49 today, 9/15/10. That’s a pretty straight line of resistance (with a slight lean lower) and seems to be menacing this week, especially coupled with options expiration.
With only two days to go before September options expiration a lot of bouncing around can still happen, but more than likely that next big bump could fall into next week as hedges expire on Friday and new positions are opened and new hedges are put in place this week and next. I have 12 options I’m short that are expiring this week with mixed success. With such uncertainty ahead I might wait until next week to make adjustments on some of these positions. See my notes below:
- SPY – one Sept 101 naked put – Expiring worthless, way out of the money.
- SPY – one Sept 112 covered call – Right at the tipping point. It’s in the money now, but by less than the premium I received. This will be a Friday afternoon decision for me. I might roll this Sept call and sell a new covered call for November or I might just stay long and buy a put. I’m actually leaning towards the latter right now, but I have almost 48 hours to decide. It really depends on how SPY behaves between now and then.
- UCO – 10 Sept 11 covered calls – Expiring worthless, I’ll rewrite November calls when they’re posted.
- UCO – 10 Sept 8 naked puts – Expiring worthless, I’ll rewrite November puts when they’re posted to complete my strangle again. This series of trades has been a great success with my cost per share down to $8.15 already, with more premiums coming in next week.
- NDAQ – four Sept 17 naked puts – Expiring worthless, I’ll probably wait for another dip in NDAQ before I open a new position.
- VXX – three Sept 20 naked puts – Going to be assigned unless volatility spikes quickly. This will give me 500 shares long. I’m debating if I’ll write covered calls on these 300 shares since I think VXX will be higher sometime between now and November options expiration.
- VXX – two Sept 24 covered calls – Expiring worthless, I sold far too high of a strike when I saw volatility was falling. I might sell November covered calls on these shares to help bring my cost down more. It depends what the premiums are when they post in a few days and how much of a risk
- MS – one Sept 25 naked put – Expiring worthless, I’ll probably write a new naked put or two when they post for November.
- MS – one Sept 28 covered call – Expiring worthless (probably), I think I’m going to write a new covered call for November, but have considered exiting the position. More than likely I’ll stay in it and sell another strangle.
- GES – two Sept 35 covered calls – As of today it looks like these options will expire in the money and my shares will be called away. GES bounces around so much that I’m not banking on that until after 4:00 on Friday. I plan to let these shares go for a loss on the series of trades and move on with more available cash in my account.
- EEM – two Sept 36 naked puts – Expiring worthless, I’ll move on to another international ETF since I’ll be taking a loss due to #12 and want to avoid the wash rule.
- EEM – two Sept 40 covered calls – Expiring in the money and my 200 shares will be called away at $40.00. Although my cost per share is down to $33.10 from all of the premiums I’ve taken in I’m going to take a loss on the shares themselves from the price I paid ($41.00) when originally assigned. This is ending as a fantastic series of trades which helps to make up for GES which was the opposite.