Options Expiration – March 2015

I only had two options left by today’s expiration and both expired worthless.  My one MDY March $165 naked put was nearly $15 out of the money by today’s close.  Knowing that it had a very small chance of being assigned, I sold a new MDY put to replace it a couple of days ago at a strike $10 higher.  I also had seven TLT March $127 covered puts that expired worthless, as my strike was $4.52 out of the money at the close.

I ended today with realized gains on both post trades totaling $1,957.67.  The MDY put will allow me to keep the $1,015.64 that I originally received when I rolled this put in the money last December.  The TLT puts will give me a realized gain of $942.03, but I still have 700 shares of TLT that I’m short and TLT is climbing.  Since I’ve taken in so much in premiums, I still have a paper profit on the entire series of TLT trades, even though TLT is $1.50 above my original short call strike right now.

In an effort to add some more profit to my TLT series of trades, I sold some naked calls on TLT today.  While TLT was trading at $131.54, I sold three TLT April $134 naked calls for $1.05 each and received $312.99 after paying $2.01 in commission.  I mentioned my limit order for this trade yesterday, but I had to reduce it by $0.05 to get it to hit this morning.  By sheer luck, I started watching TLT a few minutes before it peaked for the day.  I could see the bid/ask prices inching up to my $1.10 limit and I literally had my finger on the “Enter” button, ready to lower my strike if I saw TLT start to roll over.  The bid/ask peaked at $1.09/1.10 with my three contracts plus only one other on the line.  I hesitated when I saw the final peak, wondering if I was really lucky enough to be watching at that moment.  My delay allowed the premiums to slip faster than I could catch them.  I changed my order five times, each time by a penny, before I was able to get it to hit.

I could’ve sold for $1.09 if I changed my order 1 minute earlier.  I should have, but wanted the extra $3.  Instead, I missed $12.  It’s not a big difference and in the end, I got the trade I wanted.  My goal with these three new calls is to either earn some easy premiums and never take the assignment or sell another 300 shares short at a higher price.  I’ll be happy with either outcome.  I’m selling these calls “naked”, meaning I have no shares backing them, so my profit will come from having no cash set aside for the position.  I could lose big if TLT keeps climbing and never falls, but I think we’d be hard pressed to find someone who believes that will happen.

TLT made it up to $138.50 at the end of January before dropping $13 over the next several weeks.  I’ll be more than happy to add another 300 shares short at a cost of $135.04 (including the premiums) and ride them into the $120s before I buy them back.  I would also consider selling another 10 naked calls at a $140 strike if TLT finishes above $134 at April options expiration.  I’m not sure if my account can handle any more short positions than 2,000 shares at $140, so I might have to start buying calls for any more action beyond that.