September is a fairly light month for me on the options expiration front. I only have three options expiring – two puts and one covered call.
- SSO – September $45 Naked Put – I sold this put in late January when SSO was trading at $49.78. This morning while it was trading at $43.94 I bought back my one SSO September $45 naked put for $1.15 and paid $115.34 with commissions. Since I used an option instead of just going long 100 shares at the time, I made $283.97 rather than losing $584.00. I’m not saying making less than $300 over nearly eight months is going to make me rich, but making money while the market falls sure does help the cause.
- VNQ – September $61 Put – Goes Ex-Dividend next week so I’ll collect a little more cash for holding it. My cost will be $59.01 per share, so I’m down on it, but not by enough that I can’t be back to a paper profit with the sale of a covered call. I’m waiting to see what the November premiums will be and then I’ll pick my strike. There’s an outside chance I’ll end up selling December expiration calls if I decide to go further out of the money with the strike.
- DSX – September $11 Covered Call – I’m glad I only have 300 shares of DSX. I’m down by close to $2.00 per share after subtracting the premiums I’ve received so far. I’m going to wait until next week to sell new covered calls so I can see what the November premiums look like. I might end up going as far out as December anyway, but waiting another day won’t work me much to see if I can do OK just two months out instead of three months away.
A few hours after buying my SSO September $45 naked put back I figured out how I wanted to continue with my SSO position. I’m still short one SSO January $50 put and two January $55 puts, so I have plenty of room for upside movement should this week’s bounce turn into a bigger rally. I have 100 shares long too, but I sold a covered call at the October $42 strike which is now in the money. While SSO could easily fall back below this line, I think there’s a bias to move higher in the near term. With that in mind, I sold one SSO October $42 naked put for $2.46 and received $245.35 after commissions.
This gives me a straddle on SSO at the October $42 strike which means one side is destined to “win” while the other “losses”. Both legs cannot finish in the money, but SSO could finish close enough to $42 that I could close the side that is in the money and make a profit on both sides. Just this trade alone stands to make 6.19% or 63.0% annualized. SSO would have to fall 9.44% for me to take a loss on this trade. That sounds big at first, but this week saw nearly 5% to the upside for the S&P 500, so a reversal would get me half way there quickly. I still expect support to hold at the August low and if it does I’ll be somewhat safe on this new leg into SSO since I’ll be able to sell covered calls on it easily to keep me at a profit.