I feel better about my IWM naked put trade from yesterday. I was scared the rise in the Japanese yen would kick off more algorithmic selling today as it did yesterday when the yen hit parity (1 to 1) with the US dollar. Instead, IWM is higher and I’m up more than $100 on my three naked puts from yesterday.
Even with the small cap rise of 0.75% so far, large caps are virtually flat and tech is only up a little. I decided I should close the cheap puts on I have SSO and QQQ while I could get out with a good profit on both. They both had very little upside potential from here and with six weeks to go before expiration, my annualized return on what was left for both positions was under 5%. 5% is not enough reason for me to leave the risk in place since I’m over-invested anyway, even after dumping these three option contracts.
While QQQ was trading at $72.85, I bought to close two QQQ June $69 naked puts for $0.38 each and paid $76.78 with commission. When I sold these puts, I wrote QQQ looked like it was due to bounce. I should’ve been even more aggressive than this. QQQ rose $5.10 between my opening and closing of this contract. I was paid $513.22 for selling these two puts. That gives me a realized gain of $436.44 on this trade over three weeks, not the nine weeks I planned on. This trade finished out the series I started by combining an APPL bearish position with a bullish QQQ position. My net gain was $220.23 for far too much effort. I could’ve had a strong gain if I hadn’t closed my AAPL vertical spread early. I can’t do anything about that now outside of being content I wrapped this up for a profit.
While SSO was trading at $78.93, I bought to close one SSO June $67 naked put for $0.35 and paid $35.69 with commission. I took in $211.31 originally when I sold this put. That gives me a realized gain of $175.62 over eight weeks instead of $211.31 over fourteen weeks like I was expecting. That pumps up the annualized return substantially. I was able to pocket 83% of my gains in 57% of the time.
I wrapped up this week with a net premium intake of $951.58 on roughly $13,500 in net added exposure. That’s a great ratio and not one I’ll be able to replicate easily very soon. I don’t have any options expiring next week, but don’t plan to be idle. I’m going to look for more opportunities to close out-of-the-money (OTM) puts and sell new ones at higher strikes and/or farther OTM. At a bare minimum, I’m going to place some more limit orders to trigger on any dips in the indexes. Trades like IWM are how I’d like to trade more often, with patience and luck on my side.