Options Expiry Update

Today is options expiry so let’s review some transactions for the month of April that ended with today’s expiry.

In the Power Funds Account:

Bought 200 QID (Short QQQ) @ $46.74 and Sold 2 QIDDU (April $47 Strikes) for $1.20 to earn 2.5% return. As of close of business today, QID will likely close below strike price so my options will expired worthless.

Plan of action: Sell 2 more contracts for May $47 strikes or July $47 strikes.

In the Mini Funds Account:

Bought 200 DDM (Double Long Dow) @ $74.60 and Sold 2 DDMDW (April $75 strikes) for $2.05 to earn 2.65% return. As of close of business today, DDM will likely close above strike price so my options will be assigned and I’ll be in 100% cash.

Plan of Action: Look for opportunities, perhaps XHB or SSO.

In the Arbitrage Account:

Bought 400 XHB (Home Builders) @ $22.72 and Sold 4 XXJDW for $0.70 to earn 3% return. As of close of business today, XHB will likely close above strike so my options will be assigned and I’ll be in cash.

Plan of Action: Look for opportunities, perhaps XHB or SSO.

There were other transactions conducted during April however those will be impacted by May 16th expiry. I will run the ETF-Cashinator later in the evening tonight to generate a list of opportunities. Tune in tonight :) .

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7 Responses to Options Expiry Update

  1. madrichguy says:

    Of course you really are getting both the strike price and option premium. So for XHB, for example, you made:

    (($23 – $22.72) + $.70) / $22.72

    or 4.3%

  2. madrichguy says:

    One question — do you ever close the option contract prior to expiry, if the price dips enough?

  3. RichSlick says:

    You’re right, I didn’t include the additional appreciation because it’s not in the “bank” until the market closes but I always try to leave room to cover the brokers fees which is why I usually don’t include the “gap” (22.76 – 23.00) strike for example.

    On rare occasion, I have bought back options before expiry to sell the following months options if it’s juicy enough to do so but anytime you buy back options, the original ROI changes so it’s a matter of doing the math.

    Over the past few years, I’ve found that it’s usually best to let the option play out till the end of the month.

  4. madrichguy says:

    I’ve had some luck recently with XHB just covering the short when the premium approaches zero. Then if you get a lucky bounce toward the end of the money you can short another set of contracts for twice the premium.

    I sold XXJDW 3/24 for $1.60, then covered 4/15 at $.15.. In hindsight I would have been better off waiting (I ended up paying $60), but I figured that my gain was already pretty good, and if XHB spiked again that way I could harvest another premium before APR expiry…

    Anyway, seems like with a volatile stock there are probably often opportunities to harvest premiums several times per month..

  5. RichSlick says:

    When I started this site I wanted to make it as easy as possible for people to understand and follow so I’ve stuck with the “one trade per month” philosophy for illustrative purposes but in reality there are naked puts that can accompany the trades and other exotic trades with LEAPS that make sense via taxable and non-taxable accounts that are possible but I likely won’t discuss these here because it will undoubtedly confuse people.

  6. B. Rene Williams says:

    Hi, are these options marginable?

    Thank you.

  7. RichSlick says:

    By definition, options are marginable.

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