Options Expiration – October 2011

October has been a good options expiration for me.  Six out of seven positions are closing for a profit.

• NFLX – Bear $130/140 Call Spread – This one worked even better than planned.  I could’ve been more aggressive, but am happy to have been able to ride this one to the end without stressing much about the potential of a snap back high enough to cost me any profit.  I don’t think I’ll make this same trade again unless NFLX gets another silly rally that is senseless.  I still think they are doomed.  The model change broke them and pushed away too many subscribers to look for alternatives such as AMZN.
• T – October $28 Naked Put – This one was in the money briefly, but I wouldn’t have minded buying it at $28.  T is still chugging along and even added wireline subscribers last quarter for the first time in years.  As long as they sell iPhones they’ll keep bringing in customers, even with the competition having iPhones too.
• UWM – October $42 Put – This is my loser.  I’ll be buying 100 shares of UWM at $42 and will have a cost per share of about $39.36 after deducting the put premiums.  I think I’ll let these shares run for a while to see what ground I can make up before selling covered calls.  I don’t want to sell my shares for a loss since I have more UWM puts set to expire in January and might be buying more shares by then.  I could trade myself into the wash rule if I’m not careful.
• BA – October $60 Naked Put – This one never caused too much worry either and the way BA has been going looks like it will probably be one I get back into again.  The November $60 puts don’t look bad, but BA hasn’t closed above $65 more than once since September 1st and might be up against tough resistance soon.  For now, I’m thinking of waiting for a dip closer to $60 again or a solid break above $65 before re-opening my BA exposure.
• QLD – October $75 Naked Put – I got out with another full profit and will trade this again, but like BA I see potential resistance brewing nearby and it might be wise to wait for another dip.  Yesterday’s dip might have been the last really good buying opportunity for a while though.  It looked like a healthy step back during a longer rally.  Maybe we’ll know as early as Monday or Tuesday if that’s the case.
• QCOM – October $52.50 Covered Call – I rolled this one out for another month.  While QCOM was trading at $51.97 I bought to close one QCOM October $52.50 call and sold to open one QCOM November $52.50 call for $2.05 and received $203.50 after commissions.  Earlier this morning QCOM was trading around $52.50 when I started debating this trade and I decided to let some more time value run out.  I could’ve sold the calendar spread for $2.30 at that point, but after stepping away for a lunch appointment I came back to a $2.15 spread price.  I waited again and finally broke down for the $2.05 trade after starting my limit order at $2.10.  I’ll be charged an extra buck or two by IB for changing my order, but still think it was the right thing to do.  I only paid two cents to close my October trade, but as volatile as today has been I thought it wise to spend the few bucks to avoid the risk of it shooting higher.  QCOM was above $55 just a few days ago and could be below $49 before this new contract expires.  With today’s premiums added in to the other premiums and dividends I’ve received, my cost per share is down to $46.66.  I’m happy to keep selling the premiums as long as I can since I’m still a fan of QCOM’s long term.  Even if the covered call isn’t exercised, I’m still looking at a 50% annualized return on this option, assuming QCOM stays flat (which it won’t).
• TWM – October $48 Naked Put – This was a fun one for me.  Partly because I made a profit, but also because I was using a double inverse ETF which lost money.  This meant my long positions I was hedging against profited at the same time the hedge itself did.  I decided to close this before it expired this afternoon to ensure my little profit.  While TWM was trading at $46.87 I bought to close one TWM October $48 naked put for $1.25 and paid $125.42 with commissions.  I only made $99.15, but did it in a week when my UWM positions gained value.  I’ll make a similar trade again before long.  I just want to see a better chance for the market to turn lower again before I do it.  Then again, the premiums are so good, that the risk isn’t too great if I sell far out of the money puts while short UWM shares in the money and own other UWM shares outright.