Options Expiration – November 2022

My two November options expired worthless today giving me a full profit on the trades. My TLT November $140 covered put was trading was more than $8 out of the money and my ABNB was almost $47 out of the money. ABNB was down roughly $7.50 today and I was still that far out of the money.

Knowing those two contracts weren’t at risk of being assigned, I sold new options this afternoon. I replaced my TLT covered put and sold another TLT naked call. Then I came back in a few minutes before the close and sold an IWM naked put.

While TLT was trading at $148.44, I sold one TLT January $151 naked call for $2.09 and received $208.41 after paying $0.59 in commission. A few minutes later, while TLT was trading at $148.49, I sold one January $141 covered put for $1.15 and received $113.98 after paying $1.02 in commission. I’m calling this a “covered” put because it covers my 100 shares short position. If assigned, I’ll be forced to buy shares to cover my short. If the naked call is assigned, it’ll bring my average cost per share higher on my short position which will make it easier to sell future covered puts at higher strikes.

My ABNB November $150 became nearly worthless a couple weeks ago when ABNB gapped higher. I didn’t bother covering the naked option because I saw no reason to spend a few bucks for something that would be $0 within two weeks. Instead of replacing this position with another ABNB put, I decided to wait for ABNB to retrace its gap a little more before I get back in. Instead, I sold an IWM put since it’s down 5% from its recent high. While IWM was trading at $232.60, I sold one IWM January $230 naked put for $7.58 and received $757.42 after paying $0.58 in commission.

If IWM stays above my strike at expiration, I’ll earn 3.4%, 19.67% annualized. The small-cap ETF can only drop 1.12% for me to earn a full profit, but it can drop 3.4% before I take a loss. From its peak on November 8, it can fall 9.01% before I take a loss. I’m comfortable buying 100 shares if it’s down 9%. While it could fall sharply from there, I don’t see how I’d be at risk long-term and I’m still far underinvested in this account. If IWM does drop 9-10% from its peak, I think I’ll sell another naked put to couple with this one.