Assignment (IRA): QQQ October 21st 300 Short Put

Comments: The one rung I couldn't strike improve very much with duration, so opted to let this rung go to assignment.

I collected a total of 10.46 in credits (See Post Below), so the way I generally look at assignments is that the credits collected of10.46 ($1046) represent a realized gain. Unfortunately, the difference between the strike price (300.00) and current price (275.42) is that it is an unrealized loss. For purposes of tracking my cost basis post-assignment, I look at the strike at which I was assigned as my cost basis going forward, which starts out at 300.00, with credits received in short call premium reducing that over time.

I'll look at selling a call against on Monday at the 300 strike, targeting the expiry that is going to pay me 1% or greater of the strike price in credit. Currently, that would be the December 16th 300, paying 5.13, but we'll see what the market does with the underlying post-mopex.

Comment:

There are a couple of different approaches to covered calls, one which looks at the setup as a "cash flow" setup (the short call premium received dumps into your account like a dividend), the other that looks to get out of the position as quickly as possible because it is either tying up an inordinate amount of buying power relative to an options position (i.e., where the setup is on margin) or its delta is more directional than a farther out-of-the-money short put would be, so is more expensive to hedge off if you like to maintain a more directionally neutral portfolio.

Since this is in a cash secured/tax deferred environment, I tend to look at these as cost basis reduction/cash flow setups, but am not immune to getting impatient with them, since they can start out as fairly broken setups where the territory between what was your short put strike and current price can be discouraging. Here, I've got to make up basically 25 strikes of territory over time, with the emphasis on "time."

Trade active:

Selling the December 16th 300 call against for a 5.20 credit. Cost basis/break even of 294.80/share.

Trade active:

Rolling the December 16th 300 call to the January 300 for a 3.26 credit on this bit of strength here. Cost basis/break even of 291.54. This has the added effect of reducing long delta in the position a smidge -- the Dec 300 is -33 delta; the Jan 300, at the -38.

Trade active:

Rolling the January 20th 300 to the February 300 on strength for a 2.54 credit. Cost basis of 289.00 even. I don't trust this move a whole lot; one positive data print does not a pattern make and my cost basis isn't below current price yet.

Trade active:

Rolling the February 300 to the March 300 for a 3.01 credit on strength. Cost basis of 285.99.

Trade active:

Rolling the March 300 down to the March 296 for a .67 credit. Cost basis of 285.32 with total credits collected of 14.68 ($1468) versus the March 17th short call value of 3.02, so I've realized 11.66 ($1166) of profit on the call side.

Trade closed manually:

Closed here for a 289.97 credit. 289.97 - 285.32 = 4.65 ($465) profit. One of the short puts I took assignment on last year, so nice to see the back end of it.