I had no options expire today, so I’ll give a short account summary instead. This is what’s in my account right now:
- +300 shares of IWM
- +100 shares of MDY
- +100 shares of DIS
- -1,300 shares of TLT
- -800 contracts on TLT July $127 covered puts
My account balance has been massacred by the run higher in bonds (aka drop in yields), but I’m holding tight. I’m ecstatic that I cut my TLT ratio spread position at the end of May. Even with TLT trading above my formerly long strike, I would’ve lost another $3,600 if I had held onto the combination.
It’s bad enough that my balance is down to $80,202.79 (as of 2:12 pm). I would’ve been more upset with myself if I had held on and lost more. My plan was to sell more TLT covered puts or naked calls, but when TLT shot higher, I crossed off more covered puts from my plan and decided to wait on new naked calls. However, the run higher for TLT has been so violent, I opted to keep more cash on the sidelines for now. I’m going to wait for the Brexit (British exit from the EU) next week before making another trade.
I see the vote as a major turning point in either direction. I expect Britain to stay in the EU and stocks will rally while bonds fall, but if I’m wrong, I don’t want to have a bigger TLT short position than I already have.
I have enough room on margin that I can wait out a further spike in bond prices, within reasonable levels. I’d love to short more in the high $130s, but I don’t think Interactive Brokers would allow me many more shares. If (should say when) TLT drops to $127 where I have 61% of my short shares covered with puts, I’ll gain $10,000+. If I see a real reversal in TLT that I think shows it is finished with the current rally, I’ll sell new naked calls to attempt to squeeze out some more cash from the trade. If rates are still high in July, I’ll consider selling new naked calls anyway because I don’t think bonds will stay elevated more than a few more months, if that long. I’ve been wrong on the duration so far, so I’ll go in with a hedge probably.