It’s weird to think January options expiration is only eight weeks away. Before that, we had November’s expiration today. I came into today with four different options expiring, two on DIS, one on IWM and one on FEZ.
I said I wouldn’t regret my DIS covered call two months ago at $110 if it was assigned, but I didn’t really think DIS would race to $120 by today (from $101.73 then). It did and I’ll be assigned my one DIS November $110 covered call, which will force me to sell my 100 shares of DIS. I’ll have a realized gain of $201.20 from the first naked put assignment and this covered call assignment even though I’m selling the shares for $5 less than I paid. This realized gain doesn’t include the DIS October $95 naked put profit of $220.48 I took when I rolled the strike up to the DIS November $100 put. The DIS November $100 naked put will expire worthless today and give me a realized gain of $358.90 on top of my other DIS profits.
All of these options added together makes for a profitable series of trades for me and I’m glad I didn’t panic when DIS fell below $100 in September. I do have that tinge of regret I thought I’d avoid by selling the covered call at too low of a strike. To calm myself, I just look at my account balance and smile that I’m up 17.5% for the year-to-date. Based on the information I had at the time, I made the right decision to lock in some profits. I’ll sell a new naked put on DIS soon, but want to see it drop a few bucks first. The past week has pushed it more than $6 higher and I expect it to revisit its 10-day moving average (below $117.50) next week or soon after.
On the same day that I sold the DIS naked put and covered call listed above, I also sold three IWM November $118 covered calls. The calls were nearly $5 out of the money at the time. Today, the IWM November $118 covered calls expired worthless, $1.16 out of the money and I’ll have a realized gain of $418.72.
My cost basis for tax purposes on my 300 IWM shares is $121.78, not counting this $418.72 profit, which will be its own realized gain. I wanted to sell new covered calls that would turn my shares into a gain, but decided I didn’t want sell my new covered calls that far out of the money. Instead, I opted to aim for more guaranteed income from the premiums and not potentially more income from selling at a higher exit price. While IWM was trading at $117.03, I sold three IWM January $119 covered calls for $1.94 each and received $580.72 after paying $1.28 in commission. If assigned, I’ll have $1,171.72 more at the January expiration than I have today.
My final November option was on FEZ and I don’t have a profit on it yet. FEZ has fallen about $2.15 since I sold the puts and my two FEZ November $40 naked puts will be assigned today. My cost per share will be $37.63 after deducting the $2.37 I received per share from selling my puts. While FEZ was trading at $35.95, I sold two FEZ February $37 covered calls for $0.75 each and received $149.41 after paying $1.59 in commission. If assigned, I’ll make $359.41 more than if I hadn’t sold these covered calls and I’ll end the series of trades with a small profit.