March options expiration, naked puts in SLW, LO, POT, MOS & more

This month’s options expiration produced full profits across the board for all my expiring naked put option positions (see details below) – no surprise given the market’s continued buoyancy even in the face of various negative news events. The market’s resiliency however has also limited my put selling opportunities, and as a result I have only one new naked put position to report since last month’s expiration (see below).

Looking ahead, I have seven expiring naked put options positions in April. All but one are currently trading comfortably out of the money (OTM) so – barring a significant market downturn between now and then – I don’t currently anticipate making more than one adjustment to those positions.

Options expiration results:
The Carlyle Group LP (CG) – Some March 25-strike put options that I sold against CG on 9/13/13 (for $2.70), as part of a roll-down/roll-out risk reduction adjustment of an existing $30-strike naked put position, expired OTM for a total 12-month net return of 3.4%.*

Lorillard (LO) – A March 40-strike put option that I sold against LO on 7/26/13 for $2.95 expired OTM for an 8-month net return of 7.1%.*

The Mosaic Company (MOS) – A March 40-strike put option that I sold against MOS on 7/30/13 for $4.80 expired OTM for an 8-month net return of 12%.*

Potash Corp. of Saskatchewan (POT) – A March 30-strike put option that I sold against POT on 7/8/13 for $4.10 expired OTM for an 8-month net return of 13.7%.*

STAG Industrial (STAG) – A March 20-strike put option that I sold against STAG on 8/16/13 for $2.25 expired OTM for a 7-month net return of 11.2%.*

Valley National Bancorp (VLY) – Some March 10-strike put options that I sold against VLY on 9/19/13 (for $0.80), as part of a profit-taking roll-out of an existing $10-strike naked put position, expired OTM for a total 12-month net return of 13%.*

Williams Partners L.P. (WPZ) – A March 50-strike put option that I sold against WPZ on 8/8/13 for $4.70 expired OTM for a 7-month net return of 9.2%.*

New positions since last month’s expiration include some January ’15 23-strike naked put options in Silver Wheaton (SLW).

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Feb options expiration, naked puts in FCX, GM, IGT, RIG, TEVA & more

This month I went into options expiration with three expiring naked put positions: one was trading well out of the money (OTM) and needed no attention, while the others were somewhat in the money (ITM) but showing a profit. I ultimately decided to roll out one of the latter and accept assignment of the other (see below).

In the weeks since last month’s expiration the market experienced some emerging markets-induced turbulence. This temporarily (for now at least) spiked volatility and presented some more tempting prices on a variety of stocks on my watchlist, giving me the opportunity to initiate a number of new naked put positions (see below for details).

Looking ahead, I have seven naked put option positions expiring in March. Most are currently trading well OTM and showing nice profits. A couple – a regional bank and a pipeline MLP – are trading close to or slightly ITM, but are also currently showing a profit. I’ll be deciding whether to try to roll these out or not sometime closer to next month’s option expiration.

Options expiration results:
AmeriGas Partners LP (APU) – A February 45-strike put option that I sold against APU on 7/16/13 for $4.20 expired in-the-money (ITM) and I was put 100 units of APU at $45, for a net cost basis in the position of just under $41.

Textainer Group Holdings (TGH) – A February 35-strike put option that I sold against TGH on 7/8/13 for $3.60 expired out-of-the-money (OTM) for a 7-month net return of 10%.*

Adjusted positions since last month’s expiration include a roll-out/roll-down adjustment of a naked put position in Transocean (RIG), where I bought back a February-expiring 49-strike put option and sold an August 45-strike put option. This is actually the second time I’ve rolled this position out, both times at a modest net profit. At some point I am hoping/expecting to begin a long position in the underlying shares but am essentially using options to lower my eventual potential cost basis (now at just above $40) if I’m ultimately put the stock.

New positions since last month’s expiration include July-, August- and September-expiring naked put options in Cameco (CCJ), Diamond Offshore Drilling (DO), Ensco (ESV), Freeport-McMoRan Copper & Gold (FCX), General Motors Company (GM), Healthcare Trust of America (HTA), International Game Technology (IGT), Kinder Morgan (KMI), Linn Co, LLC (LNCO), Rent-A-Center (RCII), Transocean (RIG), SeaDrill Limited (SDRL), iShares MSCI Turkey (TUR), and Teva Pharmaceutical Industries (TEVA).

* As always, the return on sales of cash secured or naked put options was conservatively calculated based on the option premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible option assignment (i.e., my being put the shares of the underlying stock).

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January options expiration, naked puts in SLW, POT, RIG, CLF, LINE, GLW & more

The vast majority of the naked put option positions I held going into this month’s expiration – which were more than usual – expired out-of-the-money (OTM), making for a nice start to the year (see below). Most of these positions had been initiated early-to-mid last year and, given the market’s trend higher in the latter half of 2013, had been showing a nice profit for some time.

Even a couple of expiring in-the-money (ITM) naked put positions that I elected to have assigned to me – a Chilean chemical company and an emerging markets ETF (see below) – were trading at a profit, resulting in me being put shares that were currently trading at prices above my net cost basis. In both cases I decided to go long the underlying shares at what seemed to be reasonable entry prices for long-term investment (and income) purposes.

Not all of my January-expiring naked put option positions were showing profits however. There were a few positions trading ITM that I elected to roll out (see below in “adjusted positions”) for risk reduction purposes (and even for tax-loss purposes in a couple of cases).

Looking ahead to February, I only have three naked put positions expiring. One is comfortably OTM, while the other two are trading somewhat in the money but currently profitable, and I’m considering as possible electable assignment candidates at current levels.

Options expiration results:
Agrium (AGU) – A January 75-strike put option that I sold against AGU on 8/6/13 for $4.60 expired out-of-the-money (OTM) for a 5-month net return of 6%.*

Banco Santander (SAN) – Some January 7-strike put options that I sold against SAN on 4/1/13 for $1.25 expired OTM for a 9-1/2-month net return of almost 18%.*

Cardinal Health (CAH) – A January 42-strike put option that I sold against CAH on 3/19/13 for $3.20 expired OTM for a 10-month net return of 7.6%.*

Cliffs Natural Resources (CLF) – Some January 18-strike put options that I sold against CLF on 4/12/13 for $3.19, as part of a roll-out/roll-down risk reduction trade of an existing earlier position, expired OTM for a 13-month total net return of about 4%.*

Corning (GLW) – Some January 14-strike put options that I sold against GLW on 6/20/13 for $1.15 expired OTM for a 7-month net return of 7.9%.*

Digital Realty Trust (DLR) – A January 50-strike put option that I sold against DLR on 8/1/13 for $3.05 expired OTM for a 5-1/2-month net return of 6%.*

SPDR S&P Emerging Markets Dividend (EDIV) – A January 40-strike put option that I sold against EDIV on 6/19/13 for $3.8 expired in-the-money and I was assigned the option and put the shares at a net cost basis of $36.20.

Ensco (ESV) – A January 52.5-strike put option that I sold against ESV on 6/12/13 for $3.20 expired OTM for a 7-month net return of 6%.*

iShares MSCI South Africa Index (EZA) – A January 50-strike put option that I sold against EZA on 6/20/13 for $4.3 expired OTM for a 7-month net return of 8.4%.*

Healthcare Trust of America (HTA) – Some January 10-strike put options that I sold against HTA on 8/20/13 for $0.80 expired OTM for a 5-month net return of 7.5%.*

Ingredion (INGR) – A January 60-strike put option that I sold against INGR on 7/15/13 for $3.30 expired OTM for a 6-month net return of 5.5%.*

Kohlberg Kravis Roberts & Co. L.P. (KKR) – Some January 17-strike put options that I sold against KKR on 4/15/13 for $1.25 expired OTM for a 9-month net return of 7%.*

Linn Energy (LINE) – Some January 20-strike put options that I sold against LINE on 7/3/13 for $2.5 expired OTM for a 6-month net return of 12%.*

Marathon Petroleum (MPC) – A January 60-strike put option that I sold against MPC on 7/18/13 for $3.40 expired OTM for a 6-month net return of 5.7%.*

Phillips 66 (PSX) – A January 55-strike put option that I sold against PSX on 4/3/13 for $4.20 expired OTM for a 9-1/2-month net return of 7.5%.*

Transocean (RIG) – A January 45-strike put option that I sold against RIG on 6/11/13 for $3.05 expired OTM for a 7-month net return of 6.8%.*

Chemical & Mining Co. of Chile (SQM) – A January 30-strike put option that I sold against SQM on 7/31/13 for $3.20 expired in-the-money and I was assigned the option and put the shares at a net cost basis of $26.80.

Silver Wheaton (SLW) – Some January 18-strike put options that I sold against SLW on 4/17/13 for $1.75 expired OTM for a 9-month net return of 9.7%.*

Teva Pharmaceutical Industries (TEVA) – A January 40-strike put option that I sold against TEVA on 7/29/13 for $2.85 expired OTM for a 4-1/2-month net return of 7.1%.*

Titan International (TWI) – Some January 17.50-strike put options that I sold against TWI on 7/25/13 for $2.62, as part of a roll-out/roll-down risk reduction trade of an existing earlier position, expired OTM for an 11-month total miniscule profit for an essentially breakeven trade.*

Adjusted positions since last month’s expiration include roll-out/roll-down adjustments of January and one April-expiring naked put option positions into June- and July-expiring naked put options in EV Energy Partners LP (EVEP), Healthcare Trust of America (HTA), FirstEnergy Corp. (FE), Rentech Nitrogen Partners, L.P. (RNF), Potash Corp. of Saskatchewan (POT), Rogers Communications (RCI), and Global X Uranium ETF (URA).

New positions since last month’s expiration include June, July, and August-expiring naked put options in Medical Properties Trust (MPW), Omega Healthcare Investors (OHI), Textainer Group Holdings (TGH), and Ventas (VTR).

* As always, the return on sales of cash secured or naked put options was conservatively calculated based on the option premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible option assignment (i.e., my being put the shares of the underlying stock).

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December options expiration, naked puts in NLY, SAND, AGNC & more

This month’s options expiration went more or less as expected, resulting in some naked put positions expiring out-of-the money (OTM) with nice profits (see “Options expiration results” below) while a number of others were rolled out to expiration sometime mid next year (see “Adjusted positions” below). The latter examples were a combination of risk reduction adjustments, selling now for tax loss reasons, and in one case a profitable position that was rolled out to try to capture more option premium.

Meanwhile, looking ahead, I have a very large number of January-expiring positions, most of which are currently trading well or comfortably OTM. I expect to be looking to roll out some of those that are trading in-the-money, and perhaps even buy back a few that are way OTM in my IRA account (where my commissions are lowest) at pennies on the dollar as a risk reduction move.

Options expiration results:
The Carlyle Group LP (CG) – Some December 25-strike put options that I sold against CG on 6/21/13 for $2.60 expired OTM for a 6-month net return of 10%.*

NuStar Energy L.P. (NS) – Some December 45-strike put options that I sold against NS on 6/14/13 for $4.71 as part of a roll-down/roll-out risk reduction of an earlier 50-strike naked put position in NS expired OTM for a 19-month net return of 9.2%.*

Omega Healthcare Investors (OHI) – Some December 30-strike put options that I sold against OHI on 6/12/13 for $2.35 expired OTM for a 6-month net return of 7.7%.*

THL Credit (TCRD) – Some December 15-strike put options that I sold against TCRD on 4/26/13 for $1.70 expired OTM for an 8-month net return of 11%.*

Adjusted positions since last month’s expiration include roll-out/roll-down adjustments of some December and January expiring naked put option positions into June- and July-expiring naked put options in American Capital Agency Corp. (AGNC), Annaly Capital Management (NLY), American Realty Capital Properties (ARCP), Compañía de Minas Buenaventura (BVN), NuStar Energy L.P. (NS), and Sandstorm Gold (SAND).

New positions since last month’s expiration include a May 55-strike naked put option in Ventas (VTR).

* As always, the return on sales of cash secured or naked put options was conservatively calculated based on the option premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible option assignment (i.e., my being put the shares of the underlying stock).

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Nov options expiration, naked puts in FCX, CSCO, GD, SLB, LNCO & more

November options expiration went about as expected, given that the market continued to either tread water or go higher since last month’s expiration. Most of my naked put option positions expired out-of-the-money (OTM), enabling me to capture the full profits on the positions (see below).

I did end up being assigned on a couple of the positions. In one case it was intentional, to establish a long position in the underlying stock as an investment. In the other case – a gold equity closed-end fund – I had actually rolled the position out to next May, but was assigned the May-expiring put options just 10 days later (see below).

Looking ahead, I have a handful of naked put positions expiring in December. Most are currently trading OTM, but a few are close, and one – another gold-related position – is well in the money. If the market continues to behave, I expect I will probably let most ride into expiration, with the exception of the gold-related position, which I will probably try to roll out, although I’m not overly concerned with a possible assignment as it’s a small position.

Options expiration results:
Buckeye Partners, L.P. (BPL) – A November 55-strike put option that I sold against BPL on 3/19/13 for $3.10 expired OTM for an 8-month net return of 5.5%.*

First Financial Bancorp (FFBC) – Some November 15-strike put options that I sold against FFBC on 5/13/13 for $1.10 expired OTM for a 6-month net return of 7%.*

General Dynamics (GD) – A November 65-strike put option that I sold against GD on 4/2/13 for $4.20 expired OTM for a 7-month net return of 6.3%.*

Linn Co, LLC (LNCO) – Some November 35-strike put options that I sold against LNCO on 5/6/13 for $3.10 were assigned to me, and I was put the shares for a net cost basis of about $32.00. This was intentional on my part, as I decided I was willing to initiate a position in this stock at these levels as a longer-term investment.

Newcastle Investment Corp. (NCT) – Some November 10-strike put options that I sold against NCT on 3/20/13 for $0.95 expired OTM for an 8-month net return of 9%.* (Note: These options (and the stock price of the underlying company) were adjusted in the interim to reflect a spin-off in the company.)

Schlumberger (SLB) – A November 30-strike put option that I sold against SLB on 3/18/13 for $4.60 expired OTM for an 8-month net return of 6.2%.*

Sun Life Financial (SLF) – Some November 25-strike put options that I sold against SLF on 4/18/13 for $1.65 expired OTM for a 7-month net return of 6.4%.*

Textainer Group Holdings (TGH) – A November 35-strike put option that I sold against TGH on 4/25/13 for $2.15 expired OTM for a 7-month net return of 5.9%.*

Closed and adjusted positions since last month’s expiration include buying to close (i.e., taking profits) in January-expiring naked put option positions in Freeport-McMoRan Copper & Gold (FCX), Franco-Nevada Corporation (FNV), and Rio Tinto (RIO), where the put option premiums had all shrunk to $0.10 or less, resulting in an average profit of about 8% in 5 months.* I also closed out my April-expiring naked put position in Weight Watchers International (WTW) after the company suspended its dividend and continued to disappoint fundamentally. Although this meant buying back the April naked put position at a modest loss, my net overall return from selling naked puts in WTW was still a positive 3% in 8 months despite a significant decline in the underlying stock price.*

In terms of adjusted positions, in a risk reduction move I rolled out and down my short November 22.50-strike naked put position in CVR Partners, LP (UAN) to some May 20-strike naked puts for about a net breakeven cost. Finally, I had rolled out a November-expiring naked put option position in ASA Gold and Precious Metals Limited (ASA) to a May-expiring position, but was assigned the May options on 11/21/13, and the shares of this closed-end fund were put to me at a net cost basis of about $13.10.

New positions since last month’s expiration include April-, June-, and July-expiring naked put option positions in Cisco Systems (CSCO), KKR Financial Holdings (KFN), The Macerich Company (MAC), and Equity Residential (EQR).

* As always, the return on sales of cash secured or naked put options was conservatively calculated based on the option premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible option assignment (i.e., my being put the shares of the underlying stock).

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