I only had two options expire in December. Like most equity calls sold out of the money within the past couple of months, my IWM December $162 covered call finished far out of the money and I will have a realized gain on the trade of $153.33, the full premium I received on October 19. IWM was trading at $153.22 two months ago and Friday it closed at $128.29.
My other December option was an XLB December $53 naked put that was out of the money just over a week ago, but by Friday, I had a loss on the contract if I bought it back. The wise move would’ve been to close it early when I had a chance to take a profit. Since I didn’t take the wise route, I had to decide what I wanted to do next. The February contracts weren’t available yet, so I debated between the January and March covered calls. I did think about simply selling the shares that’ll be assigned, but with XLB down as much as it is already, I expect it to find support sooner than later.
XLB closed at $48.59 on Friday and is still moving lower now. I expect the majority of the selling is over with XLB down roughly 22% from its intraday high on September 20. I might sell a covered call on my shares before long, but also don’t want to cap my upside yet if we get a strong reversal soon.
The end result of all this volatility has me sitting on the sideline, waiting for a change in direction that I can jump on. Until there’s a catalyst for change, I’ll remain patient for as long as I can, but will nibble in more at some point if we see much more weakness.