UYG - Position Update


Written on January 6, 2009 – 2:49 pm | by admin

Today I had my first decision on whether to sell the near month option or go out to February.  I currently hold 200 UYG.  If I were to sell the Jan $7 for $0.15 I make nearly nothing after commissions.  If I sell the Jan $6 and get called, I would be at a loss on the position and I would also have to manage rolling up and out.  I could sell the Feb $7 for $0.55.  

In the end, I chose to sell the Feb $7s for three reasons.  I can increase my expected annual return.  I am not convinced this market will not be lower at the end of Feb and if I sold any Jan calls, I would lose the exuberant feeling (and upside premium) going around wallstreet right now.  I also don’t fully trust my rolling up and out skills yet.  I will track my UYG position on paper as if I had sold the Jan $6 and see what happens.  But for now, I will take the easy way and sell the Febs and if I have to roll it to Mar $8s, I will.  

Purchased: 200 @ $8.01
Initial Option Income: $1.20
Feb Option Income: $0.55
Other Option Income: $0.40
Expected Return: 12.73% 
Expected Hold Time: 4 option cycles 

 

Tags:

  1. One Response to “UYG - Position Update”

  2. By RON on Jan 6, 2009 | Reply

    You seem like a sincere young man …
    So here’s a UYG Suggestion.

    AT $5 and Below … the UYG is a GIFT!

    If you need an eplanation … no need to continue!

    This is a Covered Call / Put Strategy!

    The aim is to acquire as much UYG stock
    (within described ratio) as you can …
    while the stock is rangebound at $4 - $9.

    For every 100 shares of UYG bought @ $6 …

    Sell 1.25 (125 shrs) +UUFCH MAR8C @ 50 cents.
    Sell 0.50 (050 shrs) J,F,M 6-9 Puts @
    $0.40 - $3.50

    If the stock goes up … you win …
    even if you have to buy back some naked calls.

    If it goes down or hopefully stays the same
    month after month …
    you use the call & put premiums ($$$)
    to build a monster UYG position for
    2010 - 2012 when the UYG will be at least $50.00

    GOOD LUCK … Ron

You must be logged in to post a comment.