I only had two options expire today – 10 TLT May $125 covered puts and three TLT May $134 naked calls. Both legs were set to expire worthless and I planned to sell new puts and calls for July, but margin limitations didn’t agree with my plans. Since both legs were far enough out of the money, I considered them nearly impossible to be assigned after mid-day and decided to let them expire worthless. While TLT was trading at $130.13, I sold eight TLT July $127 covered puts for $1.45 each and received $1,156.67 after paying $3.33 in commission.
I tried to sell 10 puts, not just eight, but margin limitations wouldn’t let it go through. I saw that by reducing my order to eight, it would go through. However, after the order triggered, I had a margin warning (so frustrating). That made me go back in to buy back some of my May puts to appease the system. While TLT was trading at $130.10, I bought to close five TLT May $125 covered puts for $0.01 and paid $5.00 total since IB doesn’t charge commission to close options for a penny on the final day of trading.
I debated if I should wait longer before selling new covered puts in the hopes that TLT would fall further in the near-term and decided I should lock in some more premiums while I had the opportunity. I plan to add more options on Monday after my other May options expire.
I tried to roll my TLT May $134 naked calls, but even when I entered it as a calendar spread, the IB system denied my order. It makes no sense to me since the risk was going to be identical, but there’s nothing I can do about it. Either way, I’m set to make a new trade on Monday to add to my TLT position. If TLT pushes higher, I’ll get more for any new naked calls. If it drops, I’ll get more than I would’ve today when I sell new covered puts.
I still need to buy back my TLT ratio spread for June, but want to wait until later into next week to see if TLT drops any more. This was a great week for being short TLT and long stocks. I still have a long way to go to make up for the losses I sustained in the first quarter, but I see the improvement starting to come.