I only had two positions to update today after knocking out three of my trades yesterday for July expiration. FEZ and GS were the only two underlying stocks I had left and I made my decisions quickly on my next steps. I started with FEZ because I wanted to make sure I locked in a few cents profit on my July put before it fell again. While FEZ was trading at $39.22, I bought to close one FEZ July $40 naked put for $0.81 and paid $81.67 including $0.67 in commission. Originally, I sold this put for $1.03 and received $102.33 in net premiums. Closing it today gave me a realized gain of $20.66. That’s certainly nothing to brag about, but FEZ was trading at $40.40 when I made the trade, $1.18 above the price when I closed the order. So, since I used a put rather than buying the shares, I’m happy I made $20 instead of losing $118.00. I know I say it all the time, but that’s the beauty in selling options. We can make money even when our timing is a bit off.
I decided to sell my new put separately from my July put because I wanted to be sure my put was at a profit before selling the new contract. While FEZ was trading at $39.23, I sold to open one FEZ September $40 naked put for $1.23 and received $122.33 after paying $0.67 in commission. FEZ can drop only 1.15% before I begin to lose money. I decided to keep the same strike as my July naked put because it’s only one contract and I didn’t think the risk was too great to the downside. If it works for me and FEZ climbs above my strike by the expiration, I’ll earn 3.15%, 17.82% annualized.
FEZ hit an intraday low of $38.65 at the end of June and has been somewhat sideways for the past couple weeks. I don’t think it’ll fall much, if any, below the late June intraday low, so I’ll even be comfortable being assigned with a cost per share of $38.78. Obviously, I’d rather take a full profit. I expect Europe to strengthen enough to pull out a little gain from this contract if not a full gain. If we see a considerable sell-off for FEZ, I might double my position using a much lower strike. For now, I’m content to sit on this small portion of my account geared international.
My other option expiring today was one GS September $245 covered call. This option will expire worthless since GS is more than $13.50 below my strike, which means I should’ve used a lower strike to earn more in premiums. I waited to sell a new contract because GS has been rallying from its early July low of $219.04. I didn’t want to leave too much money on the table as GS regained its footing. Finally, I decided to pull the trigger today and while GS was trading at $231.35, I sold one GS September $245 covered call for $2.30 and received $228.91 after paying $1.09 in commission.
I might regret not aiming for a lower strike to lock in a higher premium, but I still believe in the GS story, especially with a new CEO coming in. Ignoring my purchase price of $265 for now since it’s irrelevant to how I need to view the stock’s prospects, I still think GS could rally back up to its 200-day moving average, at $246.43 today. If it gets that high, I expect it to hit a headwind, at least temporarily while it consolidates its gains. Falling prices and rising prices don’t usually make an equal sided V shape, but I still looked at how long it took GS to get to where it is now from the last time it was trading at $245 (two months ago) and believe it won’t get back to $245 any quicker than two months, which will be perfect for my covered call that’s set to expire in nine weeks. Ideally, GS will be above $240 by mid-September and I’ll be able to roll my contract higher. If this covered call is assigned, I’ll make 6.95% or 39.70% annualized. While that would lock in a total loss of $425 on this series of trades, it’d be nice to have $1,600 more than I have now. If GS flattens out between now and September expiration, I’ll only make 0.99% and I’ll have to question sticking in the stock. I think patience will pay off on this one.