After taking option assignments on a few positions at August’s option expiration I’ve stayed long with no covered calls on any of my newly acquired stocks. That changed today. QCOM is getting close to my purchase price and while I still think it has room to climb from here, the premiums are rich enough that I decided to go ahead and take some profit now with the risk that I’ll exit too early. While QCOM was trading at $50.62 I sold one QCOM October $52.50 covered call for $1.80 and received $179.65 after commissions.
This trade offers a 3.54% gain on the premium alone, that’s 23.9% annualized. If it’s assigned it’ll be a 48.71% annualized gain from the current price. I won’t mind if the covered call is assigned. I will have enough profit from it that I can be happy with getting in and out during a rocky period in the markets with a profit. That’s something on its own.
At some point before January I’ll have to be more cognizant about the LEAPS I sold at the beginning of the year. I’m in the money on a lot of them, but not all. I could end up taking a handful of assignments and will have to make sure I’m not on margin (although that wouldn’t be so bad if we’re moving higher by then). I’m not very worried about the potential margin use yet and even added more exposure this morning while volatility is still up and I can get better premiums for naked puts.
A few weeks ago, (on August 11th, when BA bottomed – good timing Ronan) I was asked in the comments section of a post if I had thought about getting back into BA again. I had been debating it, but was already long 100 shares in my IRA and wasn’t ready to add more exposure yet. Now that BA is up $10 from that day’s low I figured it’s better to get in a little late than never. While BA was trading at $65.68 I sold one BA October $60 naked put for $1.55 and received $154.65 after commissions. I went far out-of-the-money with this trade in case there is a pull back after such a good rally. This trade still offers a return of 2.6% or 17.8% annualized. BA can drop 11% before I take a loss on the trade. While the annualized return isn’t huge, the risk is fairly low. That’s a good cushion for a stock that’s improving and has a dividend yield of 2.55%.
I’m still long without covered calls on UCO, CSX, JPM and SSO and might cover these before long, but still see some more upside in the markets on this recent bounce/recovery. Data this week could change my mind and I could end up covering these stocks with covered calls or even just dumping them. I’ve considered and am still considering another VXX trade. VXX hit $44.73 recently and I thought about selling a December $50 naked call. That would’ve increased my break even point to $46 for VXX and set me up for a very nice profit if it worked. I didn’t pull the trigger that day, partly out of fear that things could get worse and partly due to lack of greed. Depending on how the rest of the data plays out this week I might end up finding a new strike to sell. I’ll have to be fairly confident in the market recovering to make that trade though.
I bought BA on August 9 for about $59. I think it will continue to rise above $70, before the market corrects again.
Yeah, I’m glad I got into BA back then – I’m just short a single September 50 Put.
The main position that’s killing me right now is BP – I took in a $0.50 credit when I went short a Jan ’12 45 Put and long a Jan ’13 50 Call. I suppose it could still turn out in my favor as my max risk is going lone on January at $44.50 (with a free Jan ’13 50 Call).
KCG has come back nicely lately and I’m back in profit there. I sold 6 September 12.50 Covered Calls near the close yesterday with the expectation that my 600 shares will be called away in a couple of weeks. I won’t mind if there’s a pullback though because, with the recent volatility in the markets, KCG should have pretty good earnings for the October release.