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Options Expiration – October 2016

Friday, October 21, 2016 12:45
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October options expiration worked out better for me than I expected just a few days ago. After I overpaid to roll my TLT October $135 puts earlier this week (compared to the price today), I was able to roll my TLT October $133 puts for nearly a full profit. While TLT was trading at $133.31, I bought to close five TLT October $133 covered puts and sold five TLT December $130 puts for a net premium of $1.33 per combination. I received $658.16 for the trades after paying $6.84 in commission.

The trades hit in four different transactions with the December puts selling for $1.39 or $1.40 and the October puts trading for $0.06 or $0.07. I could’ve taken the chance and waited until the final few minutes of the day to let the October puts expire worthless, but I decided to lock in the gain on my October puts while I could and bring in a good premium on the December puts before the shares moved any higher. As luck would have it, TLT dropped as low as $132.87 in the early afternoon and I could’ve made more, but I’m happy with getting $1.39 for the December puts that are more than $3.00 out of the money.

TLT has room to fall further and increase my gains on the 500 shares I’m short under these puts and the 500 shares I’m short under my December $131 puts. If TLT rises, I still have 300 shares with November $136 puts covering them, so I’ll cushion my paper loss there on top of the $0.85 in time value I have in those options.

TLT was trading at $138.65 when I sold the October $133 puts that I bought back today. So, on top of the realized gain of $433.27 (minus ~$250 in short interest and dividends over two months), I gained $2,670 on the change in TLT value. I wouldn’t mind if TLT climbed a little higher to let me get out of my November puts that are in the money so I could sell lower strikes into December or January. I still have a good bit to go before I’m whole the full series of my TLT trades, but I’m getting closer.


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