Friday, December 30, 2011

End of Year Put Selling - Update

NEWS FLASH:   Nothing happened this week in the market. The S&P 500 closed almost flat for the week (and the year).  Common sense would seem to dictate little market moving news would occur in a holiday week,   and CCI acted on that belief to make a little money to pay for those holiday gifts via put selling.

Trade status below:


Walgreens (Wag) earnings last week were basically a non event  (especially related to their battle with Express Scripts) .  Subsequently the stock rallied, the volatility rushing out of the Jan options, and time decay worked in our favor.   CCI closed the $32 Jan put position for a gain of .68/share (2.1% in two weeks)

Us Steel (X) - Nothing happened with X this week.  The slightly out of the money $25 Dec 30 (weekly options) expired worthless and CCI pocketed $.32/share (1.2% in a week)

Emerging markets (EEM) fell a bit and closed just below the $38 Dec 30 strike CCI had aggressively selected.  Earlier today CCI was able to roll this option out to next weeks $38 Jan 30 strike.  The Dec 30 option made only $.23/share (.6% in a week), but we also know received a $.49share credit ( 1.3%) for next weeks options.  Obviously there is about at a 50/50 chance that CCI will get assigned that stock next week. CCI is very comfortable building a position in EEM and this option premium collected will have lowered the effective entry price to $37.28.  If the stock rebounds CCi will have pocketed $.72/share (1.9%) in two weeks.

Corning (GLW) - Corning closed trading at $12.98.  CCI still holds the Jan $12.50 puts.  At this time the position is up about $.12/share or 1%.   CCI let this option ride into next week as there is still $.25 (2%) left in the premium.


Seems like realized volatility in the final week of the year might be naturally suppressed, and the mostly mathematically based weekly option market pricing could have a hard time factoring in that dynamic.  Hence, CCI will likely be looking to aggressively sell weekly puts again next holiday season.

No comments:

Post a Comment