Sold August TLT Option Combo

My TLT option combination for June that reaches expiration Friday in two and a half weeks seems safe from being assigned. My strikes on the June options are $145 for the covered puts and $180 on the naked calls. I have a paper profit of $249 on the June puts, minus the $230 or so in short interest and dividends I’ve paid. My naked calls have a paper profit of $1,688 so far.

The purpose of the puts is to pay for my short interest and dividend payments while I wait for the share price to drop again. That’s working. The naked calls are both another way to bring in profit and, if the new options are assigned, raise my average price per share from where I shorted my first 500 shares. I’d rather just have the profit and that’s working so far too.

I might be taking more risk than I should by not closing the June option legs yet, but I really do not see that big of a price swing coming before expiration. That takes me to today’s trades. I sold replacement trades for what I expect to expire worthless later this month. While TLT was trading at $161.78, I sold five August $170 naked calls for $2.02 each and received $1,008.40 after paying $1.60 in commission. Almost 10 minutes later, part of my next order hit. While TLT was trading at $161.79, I sold three TLT August $145 covered puts for $0.65 and then had to lower my limit order as TLT rose to $161.81 to sell two more for $0.64 each. I received $320.55 after paying $2.45 in commission.

For those who are new to my blog, I refer to these puts as covered puts because I’m short 500 shares and if these puts are assigned, I’ll be forced to cover my short shares. Since I sold my 500 shares at $149, I’ll do well to exit at $145 if that trade plays out like I think it will eventually. In the meantime, I’ll keep selling more naked calls to add to my overall profit, essentially raising my break-even point every two months.