When I wrote about selling my first VNQ naked put last week I said I originally planned to sell two contracts, but then decided to wait for another opportunity to get in on the second contract if VNQ came off its highs. As luck would have it I sold that first put last week on the day VNQ hit a recent high and then retreated. It stopped falling on Tuesday, came up some yesterday and dipped again today, but (so far) not as deep as the intraday lows from the past two days. While VNQ was trading at $55.31 I sold one VNQ December 56 naked put at $2.00 and received $199.19 after commissions.
I decided to sell this contract in the money (the current price is below the put’s strike) because I still don’t think the current dip is going to last terribly long and don’t think VNQ will drop too far. By selling in the money I keep the potential for bigger gains on a swing back to higher prices. With a $2.00 premium I also still have $1.31 in time value left on the option if VNQ does drop more before recovering. I should actually say “had” that much time value. I sold this put near the high of the morning and could’ve gotten a better trade if I had waited another hour.
I like seeing this recent broad retreat in the markets. We’ve needed some type of breather before we could feel safe about reaching new highs without having at least a 2% correction. As I write this I see that the low of the morning took us within one point of a 2% correction. I still think we need more though.
My only position that I’ve considered closing during this slide is Boeing (BA). BA got smacked hard when they had to halt testing of their new 787s. I had a decent cushion on my naked put before it moved to a paper loss, but after today’s added drop that cushion is gone. I still see $65 and $62 as areas of potential support and will also add in $64.50 as a buffer in between those prices based on it being near the 38.2% mark for the Fibonacci Lines I drew. I expect a good rebound once the 787 is back in the air. Until that day comes BA might continue its course lower. When it does turn I might even buy a call or sell a new naked put in the money to try to catch the run back up, if I have time.