I’ve been debating buying back the SSO June 50 naked put I sold last December and mentioned it last week in my rambling post. SSO was trading at $47.89 back then. Today while SSO was trading at $49.21 I bought this SSO June $50 put back for $1.03 and paid $104.02 with commissions. That gave me a realized profit of $505.29 ($609.31 – $104.02) or 11.5% over less than six months, in other words – more than 23% annualized. The best part of that is that SSO was only up 2.8% over the same period.
I was thinking about taking the assignment and writing covered calls which would allow me to capture the dividend also, but I’m not too sure how far out I want to sell the next contract. If I went as far as September I’d only get one ex-dividend date in and I don’t see the difference falling in favor of going long for just $11 in dividends. I’m not even sure I want to be in SSO as deeply yet. I might end up missing out on some of the bounce higher, but I’m more comfortable removing some risk right now. I have plenty on the table already and can wait for a clearer entry point.
I won’t be surprised to see the 200 day moving average hold for the S&P 500, but if it doesn’t the slope lower could get quite steep very quickly. I’d rather wait for a couple of good technical signals and then add more exposure. I might even sell a put at a higher strike when that happens and can rest easier in the meantime.
In a move that might seem the opposite of closing my SSO put early, I exercised my long VXX put early too. While VXX was trading at $24.84 I exercised two VXX June $50 puts and sold 200 shares of VXX for $10,000. Interactive Brokers doesn’t charge commissions on options exercises. I could’ve sold the two puts for a profit and then sold the 200 shares for a bigger loss, but the spreads were wide and I decided this was easy enough at the cost of just a few bucks difference. The loss is close to the same both ways and I get to make sure there’s no random wash rule about taking a profit on the long put while taking a loss on the long shares. This way I’ll take a loss on both legs. I have four far out of the money naked calls remaining in place through tomorrow, VXX June $35 and VXX June $70. They’ll both expire worthless and I’ll take a profit on them, but since they are so far out of the money I can’t see how they would trigger the wash rule. They are clearly “substantially different”. This whole VXX series was a bust. I’ll finish the series of trades with a realized loss of $6,988.04 and a painful lesson learned.
I’m going to wait a while, but could see another entry into VXX again farther down the road. I’ll only play it for downside gains in the future though. This vehicle is very flawed and there’s plenty of money to be made from its continuous slide lower. I’ll just hedge from the beginning each time I open a new position.