The final options expiration for my year is going out with a whimper. I only had one option contract remaining and it’s nearly $15 out-of-the-money. My MDY December $125 naked put was the position I thought about closing over the past couple of weeks for $0.10 and then it went up to $0.50+ before calming down after the Fed’s decision to begin tapering its bond-buying program. After today, the MDY put will expire worthless while the underlying ETF is trading nearly 6.5% above the strike.
I could’ve been more aggressive with the trade and aimed for a higher strike, but then I would’ve been more worried as stocks dropped some recently. Instead, with a $225 strike, I knew I didn’t have much to concern myself about. I made the full gain I planned on and that’s what matters.
Another route I could’ve taken would have been to roll this contract while the underlying was down, but I wanted to remove the position from my account completely. In 12 days, I’ll remove $23,000+- from my account to start the year with $100,000 again. MDY was a large portion of my account and I need to pair down my risk a little.
Even with MDY out of my account, I still have a little more at risk than I have available to cover. In other words, if everything went against me, I’d be slightly on margin. Of course, I don’t expect that to happen, but an option seller has to watch out for those scenarios because they do happen. I could close my January DIS puts early, but with such a short time to go before January and the new tax year, I am opting to wait another couple of weeks before I pocket the gains. The delay won’t save much on taxes for me, but every dollar will help after I have to recognize all of my capital gains this year.
Even with my desire to avoid getting overly invested before January, I might need to up my risk some. Small-caps tend to do well in January and I might up my UWM or IWM exposure next week to try to catch a little of the Santa rally.