I’ve been trying to sell more TLT naked calls for more than a week, but my limit orders wouldn’t hit before they expired. I decided to make another run at it today while TLT was up a little for the day again. While TLT was trading at $121.21, I sold 10 TLT February $124 naked calls for $1.41 each and received $1,405.74 after paying $4.26 in commission. Until I looked the week before Thanksgiving, I was blocked from selling another leg of 10 TLT naked calls due to margin constraints. I looked again after my balance pushed above $117,000 and saw I was able to sell more calls. I don’t know when the door opened for me again since I wasn’t checking on a regular basis, but I’m glad I did so that I could begin working on another good year in 2016.
I still have 10 TLT December $126 naked calls that are trading around $0.16 now, giving me a paper profit of $1,294. I have a limit order to buy these back for a dime if the price drops a little more in the next two weeks. If TLT pushed much higher and stocks drop, I could see a margin call coming into play, but I’m prepared for that and would be willing to close other positions before my TLT naked calls. I don’t think it’s going to happen, but I have to recognize it as a possibility.
I also have 10 TLT January $123 naked calls that are trading around $1.10 now, giving me a paper loss of $114. I sold the January calls while TLT was trading about $2.30 lower and the loss to time value has been less than the premium increase caused by the rise in the price of TLT. I’m not stressing about it yet with nearly $3.00 to go before I could be forced to take an actual loss.
As I’ve chronicled on these pages, TLT can move extremely fast, so I understand the risk. TLT traded above $125.40, roughly my cost per share if I go short the shares due to today’s trade for most of the first four months of 2015. Then, TLT fell below $115 before recovering sharply for nearly two months. While it wouldn’t be fun to be short 2,000 to 3,000 shares if TLT climbed back into the $130s, I believe a little patience will make any such pain short-lived and very profitable (again).