I closed out two sets of April options this morning with limit orders as the market moved higher. My XOM April $85/90 put spread was down more than $250 not long ago, but I let it run in case oil recovered by the end of this week. I sold the spread for $192.81 (net after commission) at the end of February, which means my maximum loss was $307.19 ($500 – 192.81). Since I was sitting on most of my downside risk already and couldn’t lose much more, I had a lot more upside potential than downside risk. I made the right decision since oil has bounce significantly since its lows. XOM rebounded with it and cut my losses completely. While XOM was trading at $88.24, I bought to close one XOM April $90 put for $1.91 and sold to close one XOM April $85 put for $0.01. I paid $192.18 with $2.18 in commission, which gave me a realized gain of $0.63.
When I placed the limit order I thought I might get an extra penny or two on the $85 strike, but it ended up costing me $0.09 to sell the long put. My goal when XOM was trading under $83 last month was to get the position back to a profit. When I saw it was close this morning, I entered my limit order just low enough to allow me to avoid a loss. It’s a silly game to play, working for a profit versus the $5-10 loss I could’ve taken with a market order, but I wasn’t worried about XOM long term, so I wouldn’t have cried if my order didn’t hit. It worked this time and I’ll probably stay away from XOM until there is another good sell off worth working.
SSO was an easy decision too. The market is up nicely today and we only have two and half days until expiration. While SSO was trading at $134.57, I bought to close two SSO April $125 naked puts for $0.03 each and paid $6.44 including $0.44 in commission. I don’t think SSO has much of a chance to fall below $125 by the end of Friday, but for $6.44 I was able to remove the risk. I brought in $459.15 for these puts in February, which gives me a realized gain of $452.71 today.
I think I’ll wait a while before selling more SSO puts. I’ll consider it on weakness, but want to see the market down 4-6% before I sell the options on the leveraged ETF again. Eventually, we’ll get a 10% correction and I don’t want to have many high-risk positions in play when that day comes.
Just as I noted yesterday with my orders, I sold these two sets of options that I closed this morning on the same day in February. I wasn’t trying to work these to have the same entry and exit days, but it worked out like that. Now that I’ve taken my profits on these trades, I need to find something new to make money with. I’m not sure what I’ll work on, but think it’ll probably be a large-cap ETF since I’m light for that allocation.