Stupid bonds! TLT is making February a rough month for me. At this morning’s high, it was up more than $6 from where it finished January. I dealt with a lot of the risk when I hedged a couple of weeks ago, but it still isn’t fun to see my account down so much while I wait for TLT to fall below $125 again. Interactive Brokers agreed with my sentiment this morning and sent me a margin call. I was only under by a couple of hundred dollars, but at the peak of TLT’s push higher this morning, it was enough.
I had been thinking about dumping my FEZ shares if this call happened. (IB sends warnings when you have less than 5% left for margin requirements, so I knew the risk was there.) Instead of looking for a better alternative, I opted to dump 100 shares immediately. It satisfied the margin call, but 40 minutes later I decided to give myself more cushion and sold the other 100 shares I had. I sold my 200 shares of FEZ for $30.18 and received $6,033.98 after paying $2.13 in commission. The first 100 shares sold for $30.1811 and the next 100 sold for $30.18 to be exact.
I take a realized loss of $1,344.02 for the series of trades that only included the original naked puts and one set of covered calls that expired worthless. I tried to sell new covered calls yesterday, but my order didn’t hit. I would’ve had more than $125 extra if I had sold when I was thinking about it yesterday versus waiting, but timing to that degree is hard to do correctly on a regular basis, so I try not to sweat those little missed opportunities. To make the hindsight view even more painful, FEZ is trading at $30.54 as I write this, so I timed it very close to the worse possible point that I could. The way this month is playing out reminds me not to cry over spilled milk. I made mistakes in not hedging my long equity positions for downside movement and my short Treasury position for upside movement. That mistake is complete. I have to deal with it, move on, and remember not to repeat my actions (or lack of actions) again.
In between making the two FEZ trades, I wasn’t thinking straight and made another small mistake. While TLT was trading at $133.10, I bought 10 TLT March $120 puts for $0.03 and paid $29.70 after receiving a $0.30 credit for the commission. My thought was that I would cut some of my margin requirements by removing some of the downside risk associated with the puts I sold. My mistake was that I already had that risk covered by being short the stock. Buying the new puts bought me nothing that would help. I only went down this thought process because I have a similar trade working in my TD Ameritrade account and they calculate margins differently. Buying a put changed my margin requirements there, but I also don’t have the exact same holdings, so I was simply thinking of the wrong account. At least I only wasted $29.70. I have a limit order in to sell if it gets back to $0.04. I don’t expect it to hit.
TLT is down to $131.90 as I finish this post. I’m farther from having another margin call and I’m thinking of selling new covered calls on my long positions again. I’ve hesitated to do so because I continue to believe we’ll have another big rally (like last week) and I’d miss out on the full upside run. However, if IWM, MDY, SPY and DIS all rally, it will probably mean that TLT has fallen also. I have approximately $17,500 worth of net value in my TLT options if the ETF would fall back to $124.00. It might take me a while to regain the paper losses I have, but I’ve cleared a good path for it.