The limit order for my lower MDY naked put that I entered on option expiration Friday hit today. While MDY was trading at $259.76, I bought to close one MDY September $260 naked put for $7.00 and paid $700.24 including $0.24 in commission.
This was a straightforward reduction of risk trade. As I mentioned in my last update, I sold the MDY September $265 put as a mistake, but then liked it more than this $260 strike put that I just closed. I might have picked my closing price as a stroke of luck as it appears to be the low price of the day and the bid/ask is at $7.30/8.00 as I write this a few hours later.
I chose $7.00 because it looked like MDY had a little bit of upside in it from where it was when I entered the order on Friday. I didn’t want to go under $7.00 based on the idea that anyone selling would psychologically like to stay above $7.00 if it was a close decision for the seller. $0.10-0.20 doesn’t make that big of a difference to me on this order since my other MDY put is so much deeper in-the-money. When I sold this put two and a half weeks ago, I received $1,029.12. Today’s buy back gave me a realized gain of $328.88. That’s not too bad for 17 days of waiting. I estimate that’s around a 25% annualized gain, maybe a little more.
The removal of this part of my MDY exposure opens up nearly 22% of my account in cash. I’ll need to find something else to trade, but for today, while the SPX is down more than 12 points (0.62%) I’m glad to be a little lighter in equities. I still don’t expect a major sell off, but at least I have some cash to work with if we get much of a dip beyond today’s weakness.