I made over $600 in five weeks. That’s always fun, especially when I don’t put up any money to back the trade. When these trades work out, it’s a thing of financial beauty to sell call options on shares you don’t own (aka “naked”). That means I had no capital set aside to back the order. If my naked calls were assigned I would’ve been forced to short the shares of the underlying ETF and my margin totals would’ve been adjusted accordingly, but until the options are assigned, the margin impact is extremely small and I don’t even bother adding it to my spreadsheet most of the time.

While TLT was trading at $138.28, right at the open this morning, I bought to close three TLT October $145 naked calls for $0.45 each and paid $136.27, including $1.27 in commission. Since I received $742.86 when I sold these options last month, I earned a realized gain of $604.58. I was confident going into this trade and could’ve closed the trade for a $400 gain two days after I sold the contracts, but I didn’t have a limit order in place to exit so quickly and by the time I decided it was a good move, TLT lurched higher again and pushed up to $148.89 before cooling off.

I’ll admit to being nervous when TLT reached its peak, but figured I could weather 300 shares short and knew it would come back down eventually. TLT is more than $11 off that intraday high as of today, so it would’ve been nice to be short on the way down.

I can see TLT retesting its highs before truly falling deeply again and I’ll add more naked calls when I see it above $142 next time. Of all the stocks and ETFs I follow, I enjoy watching TLT more than almost any of them because it seems to follow trend lines and patterns more than most. It’s (usually) easy to see a change in sentiment when it happens, which makes trading it less stressful. Of course I’m saying that after mistiming my last couple of trades on TLT. This one worked out well, but I certainly could’ve done better on it if I had made my trade a week or two later or even added to my position after my initial trade.

I didn’t bother trying to squeak out the final $0.45 from the contracts considering I made the bulk of my maximum gain in roughly half of the time I planned to hold the position. That’s probably the best change I’ve made over my past 25 years of trading – reducing greed and taking profits sooner than I used to. Sometimes I miss out on more easy money, but the sum of what I miss versus the sum of what the damage can be on a reversal is worth it for my trading goals.

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