Options Expiration – January 2019

I only have options on two stocks that are expiring today, AAPL and ADI. The two AAPL January $200 covered calls far out of the money that will expire worthless and give me a realized gain of $491.23. AAPL was trading at $177.41 when I sold these calls two months ago. This morning it’s closer to $157, so clearly I would’ve been much better off in selling my shares back then since the premiums didn’t do much to make up for my losses. I have one AAPL March $155 covered call that I’ve already sold and plan to add another covered call eventually, but not until I see a reason to believe the move higher from the past couple of weeks is coming to an end.

My ADI January $90 covered call was in the money a few days ago for part of a day and even closed above $90, but then it hit weakness again. I’ve been watching it to see if I should sell a new covered call before it expired. Yesterday afternoon, I decided to take the risk of a price spike and I entered a limit order for a new contract without a closing order on my January call. This morning, right at the open, when ADI was trading at $89.14, I sold one ADI March $90 covered call for $3.30 and received $329.66 after paying $0.34 in commission. ADI was trading at $88.14 with a probable $2.90 premium on this contract when I entered my order. Since I was in a good position to be patient, it paid off to not chase the order, but wait for the buyer to come to me.

If assigned, I’ll make a 5.85% return, 33.78% annualized. If not assigned, and ADI stays flat, I’ll make 3.28% on the premium alone, an annualized return of 20.56%. I’d prefer the contract to be assigned to let me start over with something new that has less downside risk. The 5.39% gain over two months would be nice too.

I wrote the above three paragraphs before 10:00 am and since I was feeling sick, I took a nap. That nap ended up costing me about $90. Had I been a bit clearer headed, I would’ve left a trailing order on my ADI January $90 covered call contract. After about four hours of sleep last night, that thought didn’t come out until after my nap and ADI went from $88.95 to $91.50 while I slept. The January $90 contract had an ask price of $0.25 and no bid. I entered a limit order for a nickel that didn’t hit and when I came back out, it was closer to $1.60. I waited all afternoon and at almost 3:45, when ADI was trading at $91.07, I bought to close my ADI January $90 covered call for $1.10 and paid $110.23 including $0.23 in commission.

The good news is that I sold the January covered call for net $386.91 after commission while ADI was trading at $89.16 in November. So, even though I could’ve cut my cost more this morning, I’m still exiting with a realized gain of $276.68 and did better than getting out at the $91.36 closing price if I had waited until the last second of the trading day. The shame of it is that I think ADI is hitting resistance at today’s high and I can see it falling below $90 again next week, at least briefly. I’m not into that much risk this year, so I took the exit price that gave me a profit and am moving on with the shares long and one covered call remaining.

I pretty much abandoned my XLF position after being assigned my naked puts in October. I wanted the share price to move higher before risking an assignment for a loss. I got over that idea yesterday and entered a limit order to sell covered calls. At the open, when XLF was trading at $25.74, I sold two XLF March $26 covered calls for $0.57 each and received $113.17 after paying $0.83 in commission.

XLF was trading at $25.53 when I entered the limit order yesterday and I think the bid/ask on the contract was close to $0.51/0.54. I started to enter my order at $0.55, but I added the extra two cents to get it to $0.57 in case we got a pop at the open this morning, which we did get and I left $0.16 on the table based on the $0.73 high trade of the afternoon. If assigned, I’ll make a 3.2% return, 20.26% annualized. If not assigned and XLF remains flat, I’ll make a 2.23% return from the premium alone, that’s 14.17% annualized.