For as much money as I had in options expiring today, it was very quiet all week. The bulk of my options today were on UCO. The only one that wasn’t on UCO was on IWM. Here’s how they played out.
I had three IWM July $95 naked puts that finished far out of the money. I’ll be taking the full profit on the $853.82 I received when I sold these puts a little over two months ago. Since I knew these puts were very safe on the path to expiration, I already sold new IWM puts at a higher strike for September. I might have to roll those higher before September if the market keeps edging higher. For now, I’m content to sit with a decent margin of safety.
My UCO ratio put spread contained 10 short UCO July $26 puts, 10 short UCO July $27 puts and 10 long UCO July $29 puts. All 30 of these are so far out of the money that I couldn’t get $0.05 for the $29 puts over the past few days. Just a few weeks ago, I could’ve made $400+- to close this spread, but my limit order was set at $1.00 ($1,000) to catch a bigger fall and give me more protection on my other long shares. Instead, the spread is expiring worthless. That still leaves me with a net gain of $84.82 on the group of 30 puts. I committed the mistake last time I had a similar position of exiting too early and it cost me. This time I waited and it cost me a missed opportunity. That’s a lot easier to stomach than losing money. It was still a good trade to make. I made money and had a decent hedge in place.
Had I known that UCO was going to break out to new full-year highs, I wouldn’t have waited to close the spread above and would’ve taken an early profit on my six UCO July $33 covered calls. I think these calls got as cheap as $0.20-0.25, maybe less. I considered closing them a month ago, but figured $33.00 would be a good exit price and I’d be able to exit the series of trades that lasted over a year with a good profit. It’s interesting that UCO stretched above $37.00 at the end of the week (even hit $38.14 today). $37 is the price I paid for my first 300 shares. I added in another 300 shares at $33.00 and another 600 shares at $28.00. My average cost per share on the series of trades was $31.50. My average sell price, including selling 600 shares of UCO at $33.00 today, was $33.17 since I closed my first six covered calls early while UCO was trading at $33.345. That’s a gain of $2,004 on the shares themselves. The options added to my gains.
I counted 21 separate option trades I made on UCO starting with three naked puts on April 17, 2012. My net gain on the options alone was $2,430.20. Combined with the gain on the shares, I made $4,434.20 on this 15-month series of trades. I tried to figure out my annualized return on the series through Quicken and came up with an “average annual return” of 24.25%, not counting today’s price changes, which shouldn’t have much of an effect. Last year’s return was -13.62 and this year’s return has been +47.40%. Just looking at it from a calculator’s quick view, that seems accurate with one caveat. The majority of my exposure was held for much less than a year. I bought the last 600 shares on April 19, 2013 and only held these 600 shares for three months. The caveat comes from the fact that Quicken doesn’t count my exposure from naked puts being assigned in its equation. The rebuttal to the caveat is that I was over-invested most of this year, based on the belief that the more recent puts would not be assigned. The over-investment changes the equation somewhat and it’s not worth working out the math to figure out the difference.
Either way, it was a good series of trades and a position I’ll get back into again soon. As oil continues to push farther above $100/barrel for WTI crude, the better the opportunity to make money with a bearish put spread will be soon. I tried selling an October ratio spread, but aimed too high again with my limit order. I’ll try again next week. I could see UCO heading back towards $80-90/barrel very quickly before the October options expire. I wouldn’t mind picking up some new shares of UCO with a cost below $30 and starting the process over again.
This weekend my parents’ celebrate their 50th wedding anniversary. My brother is flying in from CO with his wife and baby. They, my wife and I are hosting a party for them tomorrow. That means I need to leave my computer early today and prepare for the fun. This party preparation and the exciting week in the Tour de France have kept me away from my trading desk some this week. I should be back in the swing of it next week, aside from a single vacation day with my son to take him and a friend to a water park in Atlanta. I’m starting to get excited for the school year to start so I can get back to focusing on making money. At least UCO did its part for me this summer to keep my growth above my plan. I’ll have to be cleverer for the rest of the year.