$25KP Review

Yesterday’s dip left us just shy of our $50,000 goal but, on the whole, not a bad gain for 30 days!

Like the $10KP, we will be wiping the slate clean on Monday and starting with a fresh $25,000 but that is no reason to liquidate these positions, so I’m going to continue this folder with no new addiitions as we let these spreads play out so we can keep following their progress. 

AIG – Ouch!  Adding insult to injury our callers are not even going to do us the favor of expiring worthless.  Still, look at the JUICY $3.45 we are being offered for selling the Mar $45s against our August $45 calls at $6.90 and I will have to XXX this as a new play for anyone and probably will make it a new play next week so feel free to jump the gun if you aren’t already in it.  We are currently covering 3 of 5 and that’s a good continued mix for the March roll.

AXP – We’re not going to be greedy here and we can roll our 5 Feb $45 callers up to 7 Mar $47.50 callers at $1.75.  That’s effectively taking 1/3 of our cash off the table and leaving ourselve with a little upside should AXP go wild next month.

EK – Remember the days when we couldn’t fill the damn thing for .80?  Now it won’t come off that price.  We’re risking this one as I think it’s being pinned at $20 for expiration but it will suck if I’m wrong.

NDAQ – We were very lucky to have more cover here than the $10KP did, that’s the advantage to being able to spend your way out of a jam.  I also believe these are being held down but let’s be mindful of our total cost of $2.38, which means we are dead even but hopefully with $1,350 worth of premium collected.  In a small virtual portfolio, there is no reason to keep 20 of these so cutting back to 10 naked calls into the weekend is daring enough for me.

ABX – We already did our roll but let’s take our our caller for $2.10 and keep naked gold as weekend insurance.

AMGN – (almost same as $10KP) Was kind enough to wipe out our caller and he will either expire worthless or be taken out today so we can afford to wait and see next week before deciding what to do next.  We can get $3.10 for the March $45s and just 3 of those would pay for our roll down to the April $45s so there’s no reason for us to worry on this already beaten-down position.

CCJ – That’s a lot of money, let’s take this off the table.

CY – This one totally burned us.  We can roll to 20 June $24s even and roll the caller to 20 March $24s for a cost of about $500 and that sure beats paying them $3,900 so let’s do that!

EDU – Another one that ran away on us.  What a month we would have had if I had been psychotically bullish!  The very good news is that the stunning volatility of this postion has driven the price of the March $60s up to $5.10 so we actually get paid $1 to roll our caller $5 further out of the money – I love it!  We keep all of our $2.180 gain, collect $1,000 and pay our caller nothing, you’ve gotta love this stuff…

ERTS –  (almost the same as $10KP)  Looks just fine and we’ll take advantage of the very nice premium being offered on the Mar $50s to roll our 10 Feb $45 callers up to 20 Mar $50 callers for a net cost of .30 for each of the 5 (.40 is the most you should pay).  We will roll our 10 June $45 calls at $6.60 to 20 June $50 calls at $3.90, which will cost us $1.20 per original contract.  The net effect of this is that we are spending $1,600 for the roll rather than paying our caller the $2,310 we owe him but we are spending the bulk of that money on increasing the value of our own, longer position (our 20 new calls will be worth $7,800 vs. the $6,500 value of our current $45s).  We also increase the amount of premium dollars collected per month from our original $1,300 in February  to $3,200 in March.  While we didn’t "win" on this position this month, we have certainly set ourselves up for a potentially much greater win at the next expiration.