After missing opportunities in late August to sell a covered call on my 100 QQQ shares, I finally pulled the trigger today after seeing QQQ recover most of its losses from the past month and a half. While QQQ was trading at $294.70, I sold one QQQ December $305 covered call for $10.76 and received $1,075.34 after paying $0.66 in commission.
I bought these 100 QQQ shares after being assigned the stock at $225 from an April naked put that I sold back in February when QQQ was trading at $231.67. Contrary to my typical trading plan, I opted to hold onto my shares without selling a covered call as I saw QQQ as the best opportunity for growth. That plan has worked out for me so far, but I think I’ve ridden it long enough and decided to cap my potential future gains and bring in some profits now instead of waiting to see if QQQ gets stymied at its September 2 high of $303.41.
I actually considered the $300 strike with the expectation of at least a short-term ceiling on the tech-heavy ETF, but decided to give myself a little more room to profit if QQQ can make it to new highs again before the December options expiration. I also thought about selling a November contract instead, to make it through any election related sell-off, and then be out of the option before a rebound capped my gains. When I looked at both choices, I decided the 7.14% potential gain, 38.7% annualized, was a reasonable target for only nine and a half weeks, especially after the run QQQ has had from its pre-pandemic highs in February. This December naked put gives me a 3.65% cushion before I lose money versus selling my shares this morning. The November contract would’ve been closer to a 2.4% cushion. It’s not a big difference, but every percent helps when you are talking about nearly a third of your account in one ETF.
My TLT options expire at the end of this week and I plan to sell replacement covered puts on my short shares. I haven’t decided if I’ll wait for after the election before I sell new naked calls. For now, I’m leaning towards selling only one or two new calls until we see if the market spasms in either direction in the days and weeks after November 3.