Wednesday Activity:
SOLD: 5 EEM JAN 110/115 @ 3.8
Stock at 137.74, net profits = 14.4
(Reduced position from 10 spreads to 5 spreads. Defensive move in response to less bullishness on overseas investments.)
SOLD: 5 UNG OCT 42/47 @ 4.15
ETF at 60.15, net profit on = 357.40
(another reduction in position from 10 to 5 spreads. I still have an over-weighted position in UNG spreads, but this is my most risky spread at 42/47, so I decided to cut back a bit.)
Both of the above transactions also freed up cash of course. Now I have 21K available for new spreads.
*******
SOLD: 5 MOS DEC 70/75 CALLS @ 4.45
SOLD: 5 MOS DEC 75/70 PUTS @ 0.45
Stock at 146.15, net profit on call spreads = 311.0
Expected gross profit on PUT spreads = 135.
So here is my second example of closing a CALL bull spread and replacing it with a PUT bull spread. Total position return is 4.9 out of a possible 5.0. Advantages: capture early profits, and eliminate possibility of early assignment of short calls. I did this because the 70/75 spreads were very DITM for a $146 stock, and risk of early assignment is too high. Under these circumstances I will be looking for an opportunity to change over to puts. The only extra cost to make this conversion is the commission to buy the put spreads, in this case $7.
One possibility for an improvement over this tactic, is to sell the call spreads but then replace them with puts from the next further out expiration date. For example on my CNX position where I converted to PUT spreads (post 6/4 & 6/5) suppose I had sold the JAN puts instead of the OCT puts. Instead of selling them for .45, I might have sold them for .8 or .85. Perhaps a better use of the funds freed up from selling the call spreads with the same safety in depth and no assignment risk, but more profit potential.
No, Iâm not being converted to prefer put credit spreads over call debit spreads, but I do like them for this circumstance. A new trick for an old dog, but still the same dog.
**
SOLD: 5 EEM JAN 110/115 @ 3.8
Stock at 137.74, net profits = 14.4
(Reduced position from 10 spreads to 5 spreads. Defensive move in response to less bullishness on overseas investments.)
SOLD: 5 UNG OCT 42/47 @ 4.15
ETF at 60.15, net profit on = 357.40
(another reduction in position from 10 to 5 spreads. I still have an over-weighted position in UNG spreads, but this is my most risky spread at 42/47, so I decided to cut back a bit.)
Both of the above transactions also freed up cash of course. Now I have 21K available for new spreads.
*******
SOLD: 5 MOS DEC 70/75 CALLS @ 4.45
SOLD: 5 MOS DEC 75/70 PUTS @ 0.45
Stock at 146.15, net profit on call spreads = 311.0
Expected gross profit on PUT spreads = 135.
So here is my second example of closing a CALL bull spread and replacing it with a PUT bull spread. Total position return is 4.9 out of a possible 5.0. Advantages: capture early profits, and eliminate possibility of early assignment of short calls. I did this because the 70/75 spreads were very DITM for a $146 stock, and risk of early assignment is too high. Under these circumstances I will be looking for an opportunity to change over to puts. The only extra cost to make this conversion is the commission to buy the put spreads, in this case $7.
One possibility for an improvement over this tactic, is to sell the call spreads but then replace them with puts from the next further out expiration date. For example on my CNX position where I converted to PUT spreads (post 6/4 & 6/5) suppose I had sold the JAN puts instead of the OCT puts. Instead of selling them for .45, I might have sold them for .8 or .85. Perhaps a better use of the funds freed up from selling the call spreads with the same safety in depth and no assignment risk, but more profit potential.
No, Iâm not being converted to prefer put credit spreads over call debit spreads, but I do like them for this circumstance. A new trick for an old dog, but still the same dog.
**
