Covered TLT and QQQ Options

After saying in my update a week and a half ago that I thought I’d sell a covered call on my QQQ shares and a covered put on my TLT short shares fairly soon, I finally got around to making both trades today. TLT is off its highs and might have a decent amount more to slide, but I decided to go ahead and sell a covered put to cover my cost of shorting the shares in the forms of short interest and short dividends I pay out.

While TLT was trading at $145.92, I sold one TLT September $140 put for $0.69 and received $68.37 after paying $0.63 in commission. I almost went out as far as October for this trade, but decided I could either get my shares sold sooner or roll the put early and make a little more money. I expect TLT to fall back into the low $140s, but not sink below $140 before the September expiration. If that’s the case and TLT is lower in five weeks than it is now, I’ll be able to sell my next put for a higher premium and might even sell at a lower strike too.

While QQQ was trading at $367.05, I sold one QQQ October $380 covered call for $4.64 and received $463.39 after paying $0.61 in commission. Since QQQ is my only equity position, I didn’t think I should sell my call too close to the money. Not counting the premiums I’ve received, I would have a realized gain of more than $15,000 if I sold my shares at $380. I’ve held these shares for over a year, so it would be a long-term gain, but I still don’t want to be forced into paying taxes on a position I’m comfortable holding. That means, if it looks like the call might be assigned, I’ll probably roll it higher. The good news is that if it does get called away before I can cover the option, I’ll be above my goal of gaining 10% on the year, assuming TLT doesn’t go haywire again.

I still want to add more exposure elsewhere and have been considering an IWM naked put, but would rather see IWM’s chart improve before I make that trade. IWM is stuck between its 20 and 50-day moving averages. A move below its 20-day, closer to its 200-day moving average could be a much better trade.