July options expiration: CTL cash secured puts
This past Friday was July options expiration and as usual I ended up collecting some options premium from short put option positions that expired out of the money. I usually have many such positions expiring each month – as I currently do for each of the next six months – but in this case I was left with just one short put option position (see below) after having taken early profits and/or adjusting other July positions over risk concerns.
I also came close to initiating some new short put option positions during Friday’s 2.5-3% market sell-off. But volatility came in somewhat even as the market declined and my limit orders to sell the put options never triggered.
Some bearish market observers are citing Friday’s sell-off as reason enough to write off the recent market advance as nothing more than a temporary bounce. But the decline so far is well within perfectly normal parameters of a corrective move of the rally from the July 1st lows and would remain so until a break of below about 1030-1040 on the S&P 500.
Also, many stocks remain intermediate-term oversold and are beginning to show positive divergences on various price oscillators. This too suggests that – barring a re-acceleration of price action to the downside – an intermediate-term bottom of some sort could be in place or in the process of forming.
Options expiration results:
- CenturyLink (formerly CenturyTel) [[CTL]] – The July 30-strike put options I sold against CTL on 2/5/10 expired out-of-the-money (OTM) for a 5-month net return of about 4%. (I had ample opportunity over the last several months to take most of the profits in this position but elected to simply “run out the clock” with it, both maximizing profits and avoiding commission costs.)*
* As always, the return on sales of cash secured or naked put options was calculated based on the premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for their possible assignment (i.e., my being put the shares of the stock).
