I did today what I should’ve done days ago. I rolled three of my July naked puts. Actually, I didn’t roll them, but I did sell new ones to replace the ones that are about to expire worthless tomorrow, which is basically rolling them without bothering to close those puts far out of the money. Until yesterday, I felt like I was still playing catch-up from spending two weeks on vacation in June, coming back to watch World Cup games most days and then the Tour de France six days per week. What’s a man to do when so many fantastic sports are on TV? I maintained my clients’ accounts, but let my own accounts slip to the back of the priority list. It might have cost me a little missed opportunity, but life is not only about money. Odd for an investment advisor and financial blogger to say that maybe, but I like to think I’m not all-consumed with money and do take time to step back and enjoy life, including time with my son, father, and girlfriend.
Anyway, after the market closed yesterday, I finally took a few minutes to run through my account that was heavily weighted to July expiration. The good news is that most of the options were out of the money and I knew I could sell some new contracts with a very low risk of being assigned my July options on the same underlying stocks and ETF. Rather than enter orders right at the bid/ask prices for the premiums, I opted to target trades 10 to 20 cents above the bid/ask in the hopes one or two would hit the next day (today) and if needed I could lower my asking prices on Friday (tomorrow) to get the trades in.
My plan worked as stocks dipped on the open this morning. I ended up selling new naked puts on AAPL, ADI, and IWM, in that order. While AAPL was trading at $189.90, I sold to open one AAPL September $185 naked put for $4.50 and received $448.90 after paying $1.10 in commission. This premium was the high trade of the day on this contract. I thought about being more aggressive with my AAPL naked put, but I realized I could get a nice return by selling out of the money. If AAPL stays above my strike, I’ll earn 2.49%, 13.77% annualized and I have a 4.95% cushion before I lose a penny. My cost per share if assigned would be $180.51. I don’t expect AAPL to fall below $190 again in the near-term based on the trend line of higher highs that began at the end of April. The 10, 20, and 50-day moving averages all fall between $187.50 and $190.60. Each moving average could help with support. Finally, I opted to aim lower and safer based on the June 25 intraday low of $180.73, which happens to be close to the 61.8% Fibonacci retracement line. AAPL could come down to retest this area and I still won’t have a loss if assigned at that point.
While ADI was trading at $98.29, I sold to open one ADI September $95 naked put for $2.50 and received $249.76 after paying $0.24 in commission. While I’m writing this at 3:30 in the afternoon, my trade was the high of the day, but the bid/ask is $2.50/2.60 now, so I can assume I could’ve earned another $0.05. Similar to AAPL, I don’t expect lasting weakness from ADI, but still sold farther out of the money than I could have since the premiums offered a good annualized return with more room for error. If ADI stays above my strike, I’ll earn 2.70%, 14.94% annualized, with a 5.89% buffer from a loss. ADI is following its trend line of higher lows that began on May 3 and can run above $103 before it hits the intraday high reached on June 7. If ADI comes down to retest its intraday low of $94.31 from July 3, my contract will barely be in the money. My cost per share if assigned would be $92.50, just above the 200-day moving average that’s still ascending and should offer support.
While IWM was trading at $167.44, I sold to open one IWM September $168 naked put for $3.70 and received $368.91 after paying $1.09 in commission. This premium was the high trade of the day on this contract. If any sector shouldn’t feel the full pain of a trade war, it should be small-cap stocks. It doesn’t always work this way, but I’m sticking with what seems to be a sound theory for this. When my order hit, my contract was in the money, but only briefly for the day. When I placed the order, IWM had just closed for the day $0.02 below my strike. I opted to go at the money or slightly in the money to add some more risk to my portfolio and because the lower strikes didn’t offer much reward as volatility has cooled off recently. I can earn 2.25% or 12.43% annualized if the trade works out, but only have 1.87% to spare before my trade turns into a loss. As with the individual stocks above, IWM is in an uptrend. My cost per share if assigned would be $164.31, just below the 50-day moving average and close to a couple different trend lines I drew. If my trade goes wrong and I’m assigned for a loss, I don’t mind holding IWM for a fairly long time since I don’t think we’re at the end of the bull market and expect small-cap stocks to continue gaining for at least a few months, maybe more than a year. I didn’t get more aggressive or just buy the shares because I know there will be a dip or two here and there and I want to earn a little more with a slightly reduced risk.
I’d prefer not to have so much of my account set to expire in September and nothing lined up for August, but I didn’t like the premiums I saw nearer term and opted to push all three to September. I have some cash available and have my July FEZ naked put and July GS covered call left to roll tomorrow. Maybe one or more of my next trades will land in August expiration.