Yesterday I mentioned that I had thought of closing my long put on SSO. Today I got around to pulling the trigger. I didn’t catch the absolute bottom, but that’s what really got me watching. Every time I entered a price alert I’d see the markets continuing to slide by the time I checked what was going on. Finally the alerts stopped hitting and I put one on the higher side. It didn’t take long to hit the upper limit and cruise through it. I waited too long to place my order thinking we might get a quick relapse. When that didn’t happen I decided to go ahead and sell my long put while I had a profit left on it.
I jockeyed for where I wanted it, saw my chance, pulled the trigger, started to write this post and noticed I messed up. I was selling my put along with a client’s at the same time. I only entered a quantity of one though and the system defaults to him instead of me getting priority. I had to jump back in and redo my order. SSO was $0.25 higher by then, so I waited another few minutes and while SSO was trading at $48.59 I sold my one SSO March $51 put for $2.55 and received $254.29 after commissions. That’s 10 cents less than I could have had. It’s not much, but $10 for a simple mistake is annoying.
I bought this SSO put two weeks ago and paid $125.71 at the time. That means I ended up with a profit of $128.58. If I was writing for one of those cheesy websites that charges people for reading their trash, I’d gloat about this being more than a 100% return on my investment or 2600% annualized. I won’t go in that direction because in the end it’s only $128.58 and while it worked out for me I could’ve lost 100% just as easily. Had I gotten out at the bottom today I would’ve made $200, still not worth bragging about. Another reason not to brag is that just as I was about to post this I glanced over and saw SSO trading back down at $48.20. I guess I should’ve been more patient, but I’m out now and with the contract expiring in two days I didn’t see me getting rich off of it, so I’m glad I’m out with a profit at all. Now I’m back to being patient on the positions I have in play already. I really should’ve bought two contracts originally so I could then sell one to break even and let the other ride longer for better potential profit. Maybe I’ll do that next time.
I had a mixed expiry for my open March Option positions.
My DSX short March 11 Puts and March 12 Calls expired worthless bringing my basis on DSX (after taking into consideration the DCIX shares that I’ve sold) down to $11.10. Hopefully, I should be able to get around $0.50 for selling April 11 Puts and April 12 Calls next week. This would bring my basis down to $10.60 – or $10.80 if the April 11 Puts are assigned.
My short ENTR March 10 Puts expired in-the-money and I’ll be the owner of 300 shares at $9.35. However, I’m already short April 10 Covered Calls and April 7.50 Naked Puts. I’ve brought in a total of $1.50 in premium per share for all options sold so my basis will be $8.50 if the April 7.50 Puts expire worthless or $8 if they’re assigned.
I was very lucky with ICE. After briefly hitting $135 earlier this month, it pulled back to close slightly below $125. I’m currently long the Jan 2012 110 Calls. I’d originally sold February 120 Calls for $2.50 but rolled these $5 higher and out to March last month. I also got $2.50 for the March Calls so the roll cost me nothing. I paid $16.50 for the Jan 2012 110 Calls so my basis for these is currently $14.00. There are 10 expiries left before these options expire so, if I can bring in an average of $1.40 per month, I’ll have the long Calls at no cost. It looks like I’ll be able to get close to that for the April 135 Calls next week.
Had the ICE short Call Option expired in-the-money, I’d have been going short and selling April 135 Naked Puts instead of Calls.
Just sold short an ICE April 135 Call Option. I only got $0.60 for it but ICE earnings are on May 4th so I didn’t want to go out to May. We’re very near the ‘quiet’ period before earnings and I expect a little run up but am not expecting it to pass $135 in the next 3 weeks – at which point these will expire. To pass $135, there’d need to be a 5.4% rise in that time.
This brings the basis on my Jan ’12 110 Calls to $13.40. Even if the short Calls are assigned, I’ll get $13,500 in my account and would be able to buy the shares back in January at $11,000 – a profit of $1,160 after taking my current basis on the long Calls into consideration. However, I’d be selling Put Options to increase this if I did end up short the shares.
I’ve sold more Options on DSX. I’m not short 3 Naked Puts and 3 Covered Calls all at a $12 strike for April expiry. Total Premium intake was $0.63 per Strangle after commissions. This brings my basis down to about $10.50 per share if Called away at $12 – or about $10.75 if the $12 Puts are assigned.
I’m happy either way I’ll be happy – sell for a $1.50 per share profit or own double my current position at what is, by pure coincidence, the current 52-week low.
Looks like you’re doing a good job managing this position. How big of a position would 600 shares be for you? Could you double down again and create another straddle if the April contracts don’t force you to sell, but force you to buy?
You really have me thinking of starting a position with just two contracts at the May $12 strike.
600 shares represents a little over 10% of my portfolio. I wouldn’t want to approach 20% in this single holding but would probably consider selling Calls and Puts at a 2:1 ratio, i.e. sell 6 Calls and 3 Puts. With the Premium from 6 Calls and 3 Puts and DSX trading below $12 at April expiry, I’d be buying the additional 300 shares at quite a good price if it came to it.