Options Expiration – November 2019

I had three different options expire today. I could’ve rolled all three earlier, but opted to wait until today to see if anything new would change on the trend lines after stocks plateaued beginning late last week. The picture hasn’t gotten much clearer, but I opted to make my adjustments today anyway because I’d rather have some skin in the game than wait for a perfect picture that rarely shows up.

All of my option positions were far enough out of the money or in the money that I didn’t have to wait until the last hour to make a decision. My IWM November $162 covered call started the day nearly $4 out of the money. My QQQ $188/196 option strangle started the final day of trading with the naked put side more than $13 out of the money and the covered call side more than $5 in the money. In other words, I could’ve made these trades earlier in the week, but this week was all about trading my clients’ accounts and taking care of my sick son who missed most of the week out of school.

When my 100 QQQ shares underlying my QQQ November $196 covered call are called away, I’ll end the series of trades with a realized gain of $1,902.62. Instead of trying to roll the call and sell another strangle, I’m letting the shares go and decided to sell a new naked put to start over. While QQQ was trading at $202.41, I sold one QQQ January $200 naked put for $4.06 and received $405.40 after paying $0.60 in commission. The trade gives me 3.20% of downside protection before I take a loss and I have 2.07% of upside potential (11.84% annualized). With the VXN relatively low, the premiums aren’t fantastic right now, so I’m keeping some cash available to work another trade on weakness next week or soon after.

Since my IWM November $162 covered call will expire worthless, I sold a new out of the money covered call. While IWM was trading at $158.45, I sold one IWM January $164 covered call for $1.46 and received $145.40 after paying $0.60 in commission. Including this trade, I’ve received a net total of $1,209 in premiums from my IWM options during this series of trades. On this trade alone, I gave myself another 0.89% cushion from this price when I made the trade and have 4.43% upside potential (24.75% annualized). I maintained my same strategy I’ve used most of the year to target an annualized gain of at least 5% on the premium alone if the covered call is not assigned (5.13% to be exact on this trade). If IWM moves in the money on this call, I might let it get called away in January since that’ll be closer to the end of small caps’ best part of the year.

Lastly, I made a mistake that I’m sticking with. As I’ve done before, I race through my own account sometimes as I prioritize my clients’ trades. This time, I thought I had my portfolio sorted so I could see my options next to my shares, but I didn’t. So, I missed that I already had a FEZ covered call. I thought it was weird that I hadn’t sold a call to cover those shares, so I sold a new call, which is now a naked call. While FEZ was trading at $39.85, I sold one FEZ January $40 naked call for $0.70 and received $69.38 after paying $62.38 in commission. From late morning through the end of trading, FEZ stayed between $39.85 and $39.89, which means I could’ve exited the trade at the same price most likely and only lost the commissions. Instead, I decided to see if FEZ drops on Monday and I can make a few bucks. The ETF hit a recent high by $0.03 today, but I expect it to remain range bound and possibly come back down another $0.35 – $0.40 within days. If FEZ breaks out, I think the upside is limited, which is why I was selling was a covered call anyway. I’ll watch it on Monday and might just take the loss if I get spooked, but would rather not.