A few days ago, when FEZ was trading close to $38, I decided I didn’t have much of a chance to close my FEZ September $40 put for a profit and I’d just accept the option assignment at the end of this week. Based on that belief, I entered a limit order to sell what will be a covered call after I am assigned the shares. This morning, my order hit at the open since FEZ gapped higher.
While FEZ was trading at $38.94, I sold one FEZ November $39 call for $0.59 and received $57.47 after paying $1.53 in commission. My limit order was for $0.55, but someone got a deal while I missed out of a much better premium. I’m writing this in the early afternoon while FEZ is trading around $39.02 and the contract on my new short call is trading for a bid/ask of $0.86/0.91. That’s at least $30 I missed out on.
I’d rather have closed the put for a profit and sold another naked put, but only because I prefer puts over calls usually. The risk/reward is the same, but like most traders, I like my go-to trade, which happens to be naked puts. I probably shouldn’t care since I’ll make the same gain as if I had sold a put, but that’s me. FEZ goes ex-dividend tomorrow with a whopping $0.132 payout that I won’t get since I don’t own the stock yet and the puts and calls are priced as if I did, so I do miss out some there. I actually expect the $40 strike September put to be assigned tonight so someone on the other end can claim ownership before the payout. FEZ will probably drop some after the ex-div and my new covered call will be slightly out of the money for a little while again.
I chose the $39 strike because I expect FEZ to hit resistance close to where it is or at the most around $39.40 based on the trend line of lower highs that began in mid-May. If it breaks above $39.50 and remains above that line for a couple of days, I’ll have to consider selling a new naked put to go with my long shares and this new covered call. For now, FEZ is still in its downtrend and is just at the top of its range. If this new covered call is assigned, I’ll end up with a little profit, but nothing to brag about.
The GS call I sold last week was poorly timed also. It’s still out of the money, but I could’ve made another $130 or more if I had waited until this week. The rally we’ve seen over the past few days is why I spread out my orders and try not to pick a single day to make all my trades. The good news is I’ve waited on rolling my XLB covered call and can do better tomorrow than I would’ve if I rolled the covered call earlier. XLB goes ex-dividend tomorrow too and I expect my shares to be assigned since it’s a dollar in the money now and I’ll miss out on the $0.259 dividend. I’m waiting until tomorrow to sell a new naked put after the call assignment or I’ll roll it if it’s not assigned somehow. As with FEZ, I expect the price to drop due to the dividend payout.
I’m curious how long this new rally will run before we see another breather. Since I’m trailing the market in general, I’d like to see a reset again, so I can buy in lower, but I might have missed my opportunity and will have to adjust my plan yet again.