Just a few hours ago I made a pretty good case for breaking one of my rules.
That rule was to treat individual lots of shares in a given stock as individual positions.
Doing that means selling calls on each position based upon its own strike price and profit goals.
I had my eyes on adding more shares of Marathon Oil today if it tested the $15.50 level.
With a $16.50 strike expiring this afternoon on shares that had a $15.60 break even, the idea was that if I did add more shares of Marathon Oil I would just combine the 2 lots, which happened to be of equal size and then look to sell $16 strikes on Monday.
Well, that’s not the way it worked out.
Marathon Oil fell below $15.50 and I just didn’t want to wait until Monday for the other lot of shares to be available for another round of option selling.
I particularly didn’t want to be in a position of seeing shares move lower on Monday and then not having today’s purchased hedged with short calls.
That lot will now see its short calls expire and be available for more calls to be sold if shares stabilize at $15.50.
In that case, I might be happy selling the $16 calls, even as those shares came about as a result of being assigned on the $16.50 puts.
I might even consider selling those as $15.50 calls. being prepared to rollover the combined short call position from the 2 lots of Marathon Oil, if faced with assignment at $15.50.
The idea is to try to stay a step ahead of assignment if the strike is below the original price, even if the accumulated premiums may have already placed you into profit territory.
That has worked well in 2017 and the latter part of 2016, so why not?
I don’t mind the delay in the execution of the strategy that had me anxious for the trade today.
If not this week, then maybe next week.
If not this stock, then some other stock.
Those that have been trading the Gold Miners ETF with me know that even as the first three of those lots were all brought at different prices, they are all sitting with $24 strikes on them and all now expiring at the same time.
That means fewer trades and fewer commissions.
Generally, I haven’t thought very much about commissions, but as volatility has been so low, those premiums have suffered and the commissions have become more of an issue.
Still, I’m loving all of this trading again and my broker is happy, too, even as their trading fees have moved nicely lower.
Like so many things, a lesson learned about making it back in volume.
But that lesson can easily be learned at some other time.