While FEZ was trading at $40.92, I bought to close my two FEZ September $40 naked puts for $0.10 each and paid $21.58 including $1.58 in commission. I entered this order late last week and it hit in the first three minutes of trading today. The same contract ended up trading as high as $0.20 today, so as far as today goes, I did the right thing. I might have wasted $21.58 if FEZ stops sinking, but with 200 shares already on hand, I have enough upside available that I don’t need to chase a couple of dimes. Since I took in $198.42 when I sold these puts, I ended with a realized gain of $176.84.
Closing my FEZ naked puts was how I started my day. Near the end of the trading day, I decided to cut my XLF position too. While XLF was trading at $23.39, I bought to close my four XLF September $23 naked puts for $0.07 each and paid $28.95 including $0.95 in commission. XLF was closer-to-the-money (on a dollar and a percentage basis) than FEZ, but I was more reluctant to spend the few bucks to close it. My main reason was that XLF hasn’t shown the recent weakness that FEZ has. I received $217.57 when I sold these XLF puts, so I finish with a realized gain of $188.62. If I was prone to hyperbole (as some writers are), I would point out this was more than a 650% return on my investment. However, we all know I didn’t go in with the plan to “invest” $28.95, so I can’t quite call it that way. I only spell this out as a warning against those who make these types of claims.
These trades were fairly straightforward. I had the vast majority of my profit available to take, so I did. I could’ve waited on both of these since the underlying ETFs are above my strikes, but with the market looking iffy, I opted to take my profit and run. I think both of the underlying ETFs will stay above my strikes and I probably would’ve let them finish the week and expire worthless if the market was behaving differently. Instead, I thought it was smarter to spend a few bucks and remove the risk until the dust settles. I’ve even thought about selling covered calls on my 200 shares of FEZ, just to move on. That’s still up for debate.
I still have my in-the-money MDY naked puts and have an order in place to roll them out to December, but my order hasn’t found a taker yet. I entered it on Friday for $4.80 and lowered it to $4.50 today. I’m actually surprised it hasn’t hit since MDY came off its morning lows and made the order more beneficial to the buyer. If it doesn’t hit tomorrow, I might cancel it and try to get roll it in two separate trades.
It’s not a high volume contract. Interactive Brokers shows an open interest of only 345 for the December contracts. TD Ameritrade shows open interest of 118 and volume of only 15 today for the MDY December $265 contracts. I expect it to pick up later in the week as more traders roll positions or open new ones. If MDY regains its footing some through the week, the September contracts will get cheaper quickly (at least quicker than the December contracts) and my order should hit easily.