I came into today with only a couple of positions remaining. I closed my other April options over the past few weeks, mostly with poor timing. My AAPL bear put spread was a fantastic trade, except I closed it for a loss before the fantastic part worked itself out. I missed out on a nice profit by not letting the contracts run their course. I took in $64.42 last month to “get something” for the spread that I thought would turn worthless within a few weeks. Instead, that was near the top for AAPL and I could’ve closed it for nearly $1,000 today.
After that mistake, I moved to UCO. The same day I made my AAPL mistake, I made a good move on UCO by selling covered calls at a lower strike than my last block of calls. The mistake came later. Last week I closed the $27/30 vertical spread portion of my UCO ratio spread. I took in $619.84 at the time, but if I had held it, I could’ve closed it for $1,800 today. Again, the initial trade was a great idea, but I exited too early and missed out on the whole point of why I opened the trades initially. My six UCO April $28 naked puts will be assigned today and I’ll own another 600 shares. My average cost per share will drop to $27.13. That’s a loss on paper and a lot of upside potential if/when oil reversed course for another strong run higher. My first six covered calls are at $28 and my next six covered calls are at $33. If neither of these lots is called away, I’ll have to sell my next 12 covered calls at a lower strike and farther out on the calendar. I have no desire to add any new UCO naked puts. I’ve pushed my oil allocation too far as it is and don’t see the risk worth adding to my holdings. My upside potential is big enough as it is.
I tried to roll out my QQQ naked puts yesterday, but QQQ didn’t behave for me. I decided not to chase the trade since the Tech-heavy ETF looked like it was due to bounce some today. As luck finally turned my way, it did bounce and my order hit along the way higher. While QQQ was trading at $67.75, I bought to close two QQQ April $69 naked puts for $1.27 each and at the same time sold to open two June $69 naked puts for $2.57 each. I received $258.44 for the calendar spread after paying $1.56 in commission. I could’ve just closed the April puts for a small profit (~$62) and moved on. Instead, I thought the risk of selling in-the-money naked puts on QQQ was not a terrible risk considering how low AAPL, QCOM and others have been beaten over the past few days. I expect them to recover before long.
If the June QQQ puts work out for me, I’ll make a 3.86% gain (21.8% annualized). I only have a 1.94% buffer before a loss, but it’s better than nothing. QQQ found support just above its 200-day moving average yesterday. QQQ is only up 4% this year. That’s not bad considering we’re not even four months into the year, but when compared to the other indexes, the NASDAQ is lagging. I think it has some strong upside potential. It shouldn’t have a hard time getting above my $69 strike by the June expiration.
QCOM ended up surprising me with its recent decline. It looks like it fell on sympathy with Cirrus Logic’s recent retreat. QCOM is stronger in my view. It has a forward P/E ratio of only 13, a PEG of 1.0, a 2.1% dividend yield, a boatload of cash and reliable revenue from its patents. I almost didn’t write new covered calls yet on my shares, but decided the premiums were worth taking now in case my logic for being bullish takes a while to permeate through the Street. While QCOM was trading at $63.86, I bought to close two QCOM April $65 covered calls for a penny each and sold to open two QCOM June $65 covered calls for $1.93 each. I received $381.82 after paying $2.18 in commission. This gives me 4.8% (27.4% annualized) upside from the current price and I’ll still make 3.01% (17.2% annualized) if QCOM stays flat. It also brought my cost per share down to $53.21 from all of the dividends received since I’ve owned the shares and from the premiums I’ve received since my first naked puts. I’m going to keep an eye on QCOM and if it goes much lower (and finds support again), I might add new naked puts again.