Options Expiration – April 2019

I had two options expire today. One was an MDY April $350 naked put and the other was an AAPL April $175 covered call. The AAPL covered call finished deep in the money. I should’ve dealt with it a few weeks ago, but just didn’t keep my focus on my own account as much as I should’ve (recurring story here). That lack of focus was partly related to my work load for my clients and the other part was my growing expectation for a sell-off near-term. 

My AAPL series of trades, beginning with my initial naked put, finished with a realized net loss of $3,759.41. That hurts, especially since AAPL is trading above $200 this week while I’m selling my shares at my $175 strike. I made the decision to take what I could get when I sold the covered call versus trusting my initial plan to stay long for longer on AAPL. The decision not to roll it sooner came from my plan for 2019 to leave individual stocks on the sidelines as I focused on sticking to index ETFs as much as possible.

Speaking of index ETFs, my MDY April $350 naked put moved out of the money two weeks ago. I opted not to roll it before today because I thought MDY needed to come down a little from the upper $350s where it traded since last Friday. This morning, it looked like MDY had found some footing during the Barr briefing on the Mueller report. I expected a sell on the news type reaction and when I didn’t see it, I decided to go ahead and sell a new MDY naked put.

While MDY was trading at $355.75, I sold one MDY June $355 naked put for $7.00 and received $699.74 after paying $0.26 in commission. I could’ve sold it for 10 cents more five minutes before I entered my limit order, but as MDY rose, I lowered my ask price. Eventually MDY dropped enough for my order to hit and then the sell on the news reaction hit, at least a little. MDY quickly fell another $1.50 and I saw bid/ask prices that indicated I could’ve sold my put for $0.80 more than I did. The good news is it recovered into the close.

I decided to make the MDY put trade when I did since I knew my AAPL shares would be called away and I’d have cash available if we saw a major sell-off start after I created more exposure to the market. The good news is my MDY April $350 naked put finished out of the money by enough to make me not wish I had sold a higher strike while still giving me a realized gain of $699.75.