August Option Investing – Short Term August Trades

Caution Sign

Caution! High Volatility Ahead (Source: http://electricka.com)

The prices for DRN, EDC, and FAS sank far enough below my original strike prices that I was able to cover positions for 0.10 per contract. DRN fell $20 per share(!), but that is expected when dealing with leveraged instruments.

What I didn’t want to do was sell options immediately after the initial plunge. The last thing anyone wants to do is lock in a strike price just before the market rebounds (even if it is short term).

And with expiration close at hand, there was a high probability of a “dead-cat bounce”.

Late last week, the markets found some support and rose a little. And with high volatility comes high option premiums. So much so that DRN, EDC, and FAS were around 5% two weeks from August expiration. Quite a bit below what I needed to offset my losses, but something is better than nothing.

August 11th
– Sold $50.00 August calls on my DRN position for $2.50
– Sold $23.00 August calls on my half my EDC position for $2.50
– Sold $22.00 August calls on my half my EDC position for $2.00
– Sold $14.00 August calls on my FAS position for $1.10

I also entered buy limit orders (again) at 0.10, because I wasn’t sure when any of these ETFs would tank.

August 18th
– Bought $23.00 August calls for EDC @0.10 (only one contract was purchased – option volume was low)
– Bought $14.00 August calls for FAS @ 0.10
– Sold $13.00 August calls on my FAS position for $0.43

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About T. Knight
Blogging about my journey to financial independence via investing for cashflow.

2 Responses to August Option Investing – Short Term August Trades

  1. Pingback: August Option Investing – Money Management Revisted « Investing for Cashflow

  2. Pingback: Cashflow Report – Paper Income during August 2011 « Investing for Cashflow

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