Did a lot of that today in the Conservative Account. If any of the JUN expirations were ITM, them I rolled them to next month. For the last week or so I have been keeping a eye on the extrinsic value – making sure none of them were less than the declared dividend and no ExDiv dates were in the next two weeks. Then it was just a matter of timing. Today the market was up nicely in the morning, so I rolled a bunch.
This is what I did:
T – JUN to JUL 25 for 0.20 credit
KFT – JUN to JUL 29 for 0.31 credit
NYX – JUN to JUL 29 for 0.62 credit
All other positions already have JUL expirations on their Calls. I have included the table below that shows the gain on each position if it should be called out in July.
| SYMB | Strike | If Called % |
| T | 25 | 5.20% |
| KFT | 29 | 6.17% |
| NYSE | 28 | 26.50% |
| MO | 20 | 3.00% |
| QCOM | 39 | 5.69% |
| LLY | 34 | 1.94% |
Spread Account
Word has it that with volatility as ‘high’ as it is now, it’s a great time to sell options. On the other hand, they say we should be careful about selling Calendars since a reduction on volatility will hammer the far month long option premium, which I have seen happen a few times. Mostly, though, I think it’s splitting hairs. My experience with volatility collapse has been with holding Calendars through earnings and watching the trade go flat or maybe a slight loss, when the day before it was looking like a mountain of gold. Take PCLN for example. No, don’t! I don’t even want to talk about that right now (or maybe never).
If collapsing volatility is a concern, then Butterflies are a possible solution. You can do the same thing with them as you do with Calendars – do multiple ‘Flys to create a profit tent. Take for instance the possible trade below on AAPL.
The tent looks a lot like a Iron Condor with the exception that the trade is a debit instead of a credit and the risk to reward ratio is much better. In this trade, the risk is $409 but the max profit is $591 at expiration if the price is between $240.84 and $269.89. You can add more Butterflies at other strikes to stretch out the tent a bit more – it will increase our risk and and your reward, but not proportionately (somethin’ for nothin’? No way, Jose!). It’s also a good idea to make these Put Butterflies so you don’t have to worry about your Calls going ITM and getting assigned.
I also wanted to point out the IWM Bear Call I have open right now. Notice it’s a quarterly expiration and will expire on 6/30. It’s a way to add another 4 trades annually on this underlying. Other ETFs that have quarterly expirations include SPY, XLE, GLD and QQQQ. There are others, so check it out if you are interested. There is nothing different about them except the date.
On SPY, DIA, QQQQ and IWM, you can even do weekly expirations now!
“The Chicago Board Options Exchange (CBOE) today announced that on Friday, June 4, 2010, it will begin trading new Weekly options on four exchange traded funds (ETFs) Standard and Poor’s Depositary Receipts (SPY), Nasdaq-100 Index Tracking Stock (QQQQ), DIAMONDS Trust, Series 1 (DIA), and iShares Russell 2000 Index Fund (IWM).”
“New series for Weekly options are listed each Friday and expire the following Friday except that no Weeklys will be listed that would expire during the expiration week for standard options (the third Friday of each month).”
June expiration is looking pretty good. Right now I have $1,618 in the bank and the rest of the open positions in profitable places at this time. I don’t expect any surprises (who does?) and I will have exited them all by Wednesday’s market close. Remember, this is a triple witching month and strange things can happen – so don’t hold past Wednesday.
Good luck.
◄ Jeff ►
