Options Expiration – December 2021

The only option I had set to expire this week was my QQQ covered call. On Wednesday, when QQQ saw a $14 price swing intraday, I decided to get out of the option early. While QQQ was trading at $389.80, I bought to close my one QQQ December $385 covered call for $7.21 and paid $721.57 including $0.57 in commission.

I wanted to hold the option until it expired today, but didn’t want to lose more on the rally. The ETF closed Wednesday at $396.91, and I felt I made the right move. Then it gave it all back on Thursday when I could’ve saved a few hundred dollars on closing the covered call. Again, this morning, QQQ sank, but then turned positive. I’m writing this with less than 30 minutes to go in the trading day and see I could’ve gotten out of the option for $1.25 if I had waited.

That’s spilled milk now, but I had to make my trade when I did based on the information I had at the time. I could’ve done worse and could’ve done better. I didn’t want to wait to make the trade because the risk of assignment and then having to pay taxes on more than $16,000 in capital gains. I plan to continue holding onto QQQ into 2022 and maybe much longer. At least it’ll be a long-term gain when I sell it, but even at a 20% tax rate, that’s a chunk of change.

QQQ was trading at $369.32 when I sold the covered call and brought in $372.60. The difference between my sale price in October and my purchase price today gives me a realized loss of $348.97 on the option and an unrealized gain of roughly $1,700 on the underlying shares. I can live with that for two months of investing.