Closed FEZ Naked Call

In the first second of trading on Monday, while FEZ was trading at $39.75, I bought to close my FEZ January $40 naked call for $0.65 and paid $65.72 including $0.72 in commission. This option was my mistake trade from Friday when I sold this call before I realized I already had a covered call on my shares. FEZ has moved lower since Monday and I could’ve made another $5-7 if I waited until today, but my goal was just to get out without a loss and refocus when I had more time.

I didn’t bother posting on Monday because I thought I’d get around to making another trade Monday or Tuesday. Since a profit of $3.66 is hardly worth a post of its own, I waited. I still have almost $25,000 in cash that’s uninvested and not backing any put options. I’ve waited to make another trade because stocks were looking more fragile after such a run higher.

Today, we’ve seen a little weakness, but 20 points off the S&P 500 and 200 points from the Dow Industrials is not what it used to be. I’d like to see a few percentage points lower or at least two percent before I sell another out of the money naked put. A little more downside pressure will help push volatility higher and make option premiums more valuable, which reduces risk a bit more by lowering my cost per share if assigned.

I’m still looking for another trade and will jump on it when I see a decent risk/reward opportunity. A few days to a week of weakness could be a nice set-up for a strong December rally to finish the year.