As part of my trading process, each month I must create a plan for the week of expiration for any existing positions that contain options due to expire. For December, I have the following positions with options to deal with by Friday:
- $CRM Long the stock with a short December 170 Call (covered call). Call is currently OTM, look for it to expire & keep premium collected.
- $FCX Long the stock (2/3 position) with a short December 34 Call (covered call, 2/3 position). Call is currently OTM, look for it to expire & keep premium collected.
- $YUM Short the December 62.5 Put (1/2 position, part of a January Risk Reversal trade). Put looks safe to expire. This would leave me with a short January 62.5 Put (1/2 position) and a long January 70/72.5 Call Spread.
- $SWHC Short the December 12 Call (part of a January 12 Call Calendar). Expect this to expire worthless, keep premium collected when sold.
- $JCP Long the stock in long-term account with a short December 22 Call (covered call). Call is currently OTM, look for it to expire & keep premium collected.
- $GRPN Long the December 5 Call (tied to short stock position in long-term account). Will address this by Friday, no need to rush to do anything as it is a hedge to the short stock position.
- $PAY Short the stock (1/2 position) with a December 29/30 Bear Collar. Will address this by Friday, no need to rush to do anything as it is a hedge to the short stock position.
- $VFC (long a December 155/145 Put spread, long a Dec 150 Call – sold the 145 Put to pay for the Call – locks in $5 & gain capped at $10 on the Put Spread). Will address this by Friday.
2012 ETF Short pairs trades
Each year in January I put on a pairs short trade for $TNA & $TZA as well as $FAS & $FAZ. The thesis is to design a trade that minimizes margin use to capture the decay in their structure over the course of the year. It is now time to prepare to unwind these trades as I own December option pieces that are due to expire. The January pieces I own will be sold at the end of the year (My typical approach is to by LEAPS in January each year and then sell premium all along the way to recoup the cost of buying premium.)
OTM = Out of the Money