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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