SmoothSailing#31

I was assigned IWM at 182 in early January, the 11th, so I wanted to stick with that strike until I got back to it.  That is underwater, last time it was assigned to me was around $220.  It popped up after that and hit a high of $199.23 but I knew/hoped it’d drop again into the 180s, so I just kept selling calls at around the 80-85% POS (.20 or .15 delta, same thing) strike and rolling now and then if I had to, to avoid assignment.  I let myself get assigned eventually so that I could start selling puts with the same 85% POS strike so I could buy it back at 182 or close to it.  Out at 182, back in at 182, and meanwhile, made some premium.  The weeks that the strike and the stock were close together I did real well.  There were some weeks those rolls didn’t make me anything because the spread between stock and strike was large, but they never cost me anything.  (Never pay to close a trade)  I was just biding my time.

Today I sold 182 puts for Friday the 3rd.  So I’m back to my strike and don’t care now if I get assigned or not.  If I do, I’m back in at 182, in time to collect the next dividend.  If not I’ll roll out again.  I still need to walk it back up to $220 or so before I am technically not underwater, although I’ve made enough in premium to wipe that out anyway.  But I like to mentally stick with my last or worst assigned price.

So I calculated my premium between today, Friday the 24th, and when I sold those 182 puts In January.  Between that January assignment at 182 and today, I made $8.62 in premium.  That includes the debits when I bought to close a few at around a nickel, mostly using set-and-forget limit orders.  That’s seven weeks, so that’s $1.23 per week.  Not too shabby.  Annualized that’s about 33% a year using $190 as an average IWM price.

I tried to only sell puts on down days and calls on up days, that seems to bend the odds in my favor, even the times I had to wait it out a day or three.  Using the 80-85% POS rule seemed to keep me from having to roll too many times, and kept me from getting assigned if I didn’t want to get assigned.  In other words, it worked.  Once I get out from being underwater, if/when IWM hits $220 again, it won’t matter so I won’t use the 80% POS strike guideline, I’ll go back to selling closer strikes so that the premium is better.

So I’ll repeat myself: Just about every trade, every situation, can be managed to your advantage one way or another if you pay attention, especially on expiration day.  Happy trading!