Options exp (Mar), naked puts on BX, GFI, RIG, COH, JOY, RIO, LMT & more

This month’s options expiration was another profitable one, as almost all of my expiring naked put option positions expired out of the money – no surprise considering the market’s continued positive tone. The one exception was a small naked put position in a shipping stock that I allowed to expire in the money, which will leave me with a starter long (and currently underwater (no pun intended!)) position in that beaten-down sector (see below).

I’ve also initiated a number of new naked put positions – in fact more than I might have expected given the market’s relatively high level and the extra-low VIX. However when looking at the individual trades (see below) it makes more sense, as most are in sectors or individual stocks that are underperforming (to say the least in some cases). Many of these are also “starter” positions as well, allowing for the possibility of adding to them at lower underlying share prices if the opportunity arises.

Options expiration results:
The Blackstone Group (BX) – Some March 13-strike put options I sold against BX on 9/26/12 for $0.85 expired OTM for a 6-month net return of 6%.*

Itau Unibanco Holding (ITUB) – Some March 15-strike put options I sold against ITUB on 8/20/12 for $1.00 expired OTM for a 7-month net return of 6.2%.*

Norfolk Southern Corp. (NSC) – Some March 65-strike put options I sold against NSC on 9/20/12 for $3.80 expired OTM for a 6-month net return of 5.7%.*

Knightsbridge Tankers (VLCCF) – Some March 10-strike put options I had sold against VLCCF as a roll-down, roll-out risk reduction trade of an earlier 12.50-strike position expired in the money and I will be assigned the options and put the underlying shares for a net cost basis of about $10.45. I had considered rolling this options position out again, but – given the carnage that the shipping sector has seen – decided instead to establish an initial small long stock position in the sector. I may sell some additional put options against VLCCF or other select shipping-related stocks on further weakness.

New positions:
ArcelorMittal (MT) – On 3/1/13 I sold some September 13-strike put options against MT for $1.00.

The Carlyle Group (CG) – On 3/15/13 I sold some September 30-strike put options against CG for $2.60.

Coach (COH) – On 2/26/13 I sold some August 45-strike put options against COH for $3.60.

Franco-Nevada Corporation (FNV) – On 3/1/13 I sold an October 45-strike put option against FNV for $3.20.

Gold Fields (GFI) – On 2/28/13 I sold some October 8-strike put options against GFI for $0.80.

Joy Global (JOY) – On 2/21/13 I sold an October 55-strike put option against JOY for $3.75.

Lockheed Martin (LMT) – On 2/26/13 I sold a September 85-strike put option against LMT for $5.70.

Pan American Silver (PAAS) – On 3/1/13 I sold some October 14-strike put options against PAAS for $0.95.

Rio Tinto (RIO) – On 3/15/13 I sold some October 47.50-strike put options against RIO for $3.50.

Sasol (SSL) – On 2/21/13 I sold a September 45-strike put option against SSL for $4.30.

Silver Wheaton (SLW) – On 2/28/13 I sold some September 28-strike put options against SLW for $1.60.

Titan International (TWI) – On 2/26/13 I sold some October 20-strike put options against TWI for $1.85.

Transocean (RIG) – On 3/11/13 I sold an August 49-strike put option against RIG for $2.65.

Weight Watchers International (WTW) – On 3/4/13 I sold an October 40-strike put option against WTW for $4.70.

Closed/Adjusted positions:
Cliffs Natural Resources (CLF) – On 3/6/13, in a risk reduction move, I rolled out some April 26-strike put options I had sold against CLF (for $1.60) by buying them back (at $2.74) and selling an equal number of October 23-strike put options for $3.00, for an overall net credit. If the put options are ultimately assigned and I am put the stock, my net cost basis will be about $21.30. If the stock continues to drop further (into the mid teens) as seems quite possible, I will consider rolling out again and doubling the position size, as these are levels where I would be comfortable taking a longer-term investing position in the stock.

* 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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