Sold June QQQ Naked Put

I’ve been slow to replace my AAPL naked put that expired a week ago. Part of that delay in action was due to my expectation of some weakness hitting stocks and the other part was just due to time constraints from work and life in general. I got caught up today, mostly, and finally got to take another look at my own trading account.

Not only had I not replaced my AAPL April naked put, I saw that my MSFT May $115 naked put was trading under a dime after MSFT the earnings release that pushed the stock above $130 as of this morning. I wouldn’t be surprised to see MSFT “fill the gap” down to the highs reached before the earnings call, but I’m not banking on it. Rather than roll my MSFT put, I opted to go back to my plan of selling index options instead of options on individual stocks.

While QQQ was selling at $190.14, I sold one QQQ June $191 for $4.44 and received $443.32 after paying $0.68 in commission. I usually sell out of the money puts and decided to go in the money this time to take essentially the same risk/reward approach as I would if I was selling an out of the money covered call.

Anyone who tells you he or she can predict where stock prices will be in two months while the QQQ is at a record high is likely a bit overconfident in their abilities. I think the QQQ has room to move a bit higher, but I’m not convinced enough to buy the shares outright or buy a long call option. By selling this naked put, I’ve given myself a 1.88% cushion before I take a loss on a dip in prices. If QQQ gains 0.45% to move above my strike, I’ll earn 2.38% or 15.26% annualized. I considered an at the money strike of $190 for June, but the difference was only 0.28% of a better loss buffer. The higher strike offers a potential gain of 0.22% more. That’s not a lot to brag about, but I’d rather have a 15.26% annualized gain than the 13.85% the at the money strike could deliver.

Now that this trade is complete, I need to find something else to replace my MSFT naked put. Let me know if y’all have some suggestions. I doubt I’ll do much stock research this weekend since I have a busy couple of days planned with a day trip to our farm and then celebrating Greek Easter with family on Sunday after watching Avengers Endgame.