A couple of weeks ago, I talked about closing my only April option contracts that made it to expiration, but I decided to let it play out. Today, that decision proved to be wise. My two UWM April $72 puts expired worthless. I’ll pocket a realized gain of $808.45, which is a gain of 5.95% or 16.5% annualized based on the cash I had backing the position.
On the day I mentioned my debate about closing the UWM puts, I closed my April SPY option instead. The strike was $186 and I was correct that SPY was heading farther south. SPY fell as low as $181.31 last Friday. However, my original strike was more prescient than I realized. SPY closed at $186.12 yesterday and $186.41 today. I could’ve gotten out cheaper or even without paying anything, but would’ve been worried the whole way through on the dip.
I opened new UWM exposure, UWM July $77 puts (to replace of the expiring UWM April $72 puts), a little early. UWM fell as low as $75.08 on Tuesday before recovering. That nadir was close to $12 below where UWM was when I sold the puts, but still above my worst case prediction. I still have a lot of time left in these July contracts and I’m not extremely confident that the recent sell-off is done. The Russell 2000 index isn’t even above its 10-day moving average yet. Other indexes are looking better, but need to get through nearby resistance before I get more bullish again.
My current allocation shows my tepid outlook. I have more than $24,000 sitting in cash, not backing any puts. That’s close to 24% of my account. After the long Easter weekend, I plan to start nibbling in on some new positions. I might get back into DIS with out-of-the-money options. Since four of my seven open option positions are in-the-money or just barely out-of-the-money, I don’t feel I need to rush into anything. I have upside potential and since I have a couple of leveraged ETFs in my portfolio, any move lower could quickly cost me the paper gains I have so far.