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: UYG
One Response to “UYG - Position Update”
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