Sold XLB Covered Call

Since the December options expiration Friday two and a half weeks ago, I’ve made no trades. As I mentioned in my options summary post back then, I thought stocks were oversold and I opted to wait and let the bounce play out some without selling new covered calls on the stocks and ETFs I owned already. The decision not to sell covered calls since then was a good move (or non-move?), but with so much going on late in the year, I didn’t realize how much cash I was leaving on the sideline as it became clear the slide was over for now.

This afternoon, I got back into the swing of things with a small trade. While XLB was trading at $52.16, I sold one February $52 covered call for $1.60 and received $159.33 after paying $0.67 in commission. When I entered the order, XLB was trading around $51.94 and the call was trading closer to $1.50 and I didn’t think the order would trigger until tomorrow.

If the call is assigned, I’ll make 2.75%, 25.97% annualized. I bought the shares at $53 on a naked put assignment, so the two combined premiums have me positioned to turn a small profit on the short series of trades. It won’t be much, but it’ll be better than a loss.

When I entered the order, I was planning to make two other trades at the same time, but I’ve held off so far. I’m still long 200 shares of AAPL and was debating selling one covered call on the shares to allow half of the position to run, but also cut my losses some by bringing in the premiums. I also considered a naked put on MDY. The MDY trade would set me up for being on margin if assigned, unless the AAPL covered call I was going to sell was assigned.

I might sell these options tomorrow or Friday. The sticking point that preventing me from pulling the trigger today is that I don’t want to cap my AAPL growth yet and I don’t want to sell the MDY naked put without having a trade in place to open up more cash. By waiting, I’m missing out on potential gains on MDY, but it’s hard to put a barrier in front of the 2-3% daily gains in AAPL right now. AAPL will ease off soon I’m sure and I’m going to try to squeeze every bit out of it until then apparently.