I came into today’s options expiration with only two naked puts in place, one AAPL April $165 naked put and one NFLX April $235 naked put. APPL was nearly $14 out of the money earlier this week, but got hit hard the past two days, which helped me tremendously. Since I expect this decline to be temporary, the $13 price drop that brought the stock’s price to within a dollar of my strike actually benefited me by raising the premiums for the new put I sold. While AAPL was trading at $165.75, I sold one AAPL July $165 naked put for $8.05 and received $804.31 after paying $0.69 in commission.

AAPL traded as low as $165.59 before I entered my trade and I decided that its 200-day moving average at $165.53 might hold support and keep AAPL from collapsing. I debated selling a June put instead of the July put, but I wanted more premium to cushion its fall if it did break support. I figured any price drop will likely occur in the next few days or weeks, so the risk is more short-term than long-term probably. Since I was banking on the 200-day moving average to hold support, but also didn’t want to just buy the shares and take a bigger risk, I opted to sell the at the money put.

AAPL can drop another 5.31% before I lose any money, but it can only lose 0.45% for me to take a full profit. The good news is that if it works out for me, I will have a 5.12% return, 19.89% annualized. If the July option is assigned, my cost per share will be $156.96. This cost per share is one reason I picked this strike and expiration. The trend line I drew using the intraday lows from April 2017, June 2017, July 2017, and February 2018 line up to show potential support around $157-158. Worst case, I think AAPL could fall as low as the February 9 low of $150.24 and then bounce above my cost.

It might have been smarter for me to go ahead and close my April $165 put when I sold the July $165 put, but I opted to take the risk and wait to see if AAPL would push higher before the close. What I didn’t consider when I made this decision, was that I wasn’t going to be at my desk for the final 45-50 minutes of trading. The April put was trading around $0.18-0.20 at the time I sold the July put, but the bid/ask started rising after my July trade went through. I stuck to my gut feeling about the moving average support and entered a limit order for $0.05 to hit if AAPL didn’t plummet after I left my office. I ended up watching the price at every stop light I came to, just in case I had to pull over and change my limit order. Finally, while AAPL was trading at $165.95, I bought to close my one AAPL April $165 naked put for $0.05 and paid $5.67 including $0.67 in commission. I decided it was smarter to leave an order in for a nickel and give up $5-6 than risk AAPL ticking below $165 in the final minute or two of trading and cost me an assignment after I already sold the new put for July. Closing this trade gave me a realized gain of $400.70.

My NFLX position was easier to deal with since NFLX was trading around $329 as I wrote this part with just over an hour to go in the trading day. I’ll have a realized gain of $1,161.35 and will wait to see what I replace it with until next week. The July puts aren’t available yet for NFLX and the June puts are too cheap. I might have to venture into something new or multiple new positions. As opposed to my AAPL April naked put where I sold the ideal naked put to earn a full profit with nothing left on the table, I could’ve sold my NFLX strike $90 higher. That’s insane to think about how fast it has grown. The P/E ratio and low premiums makes it a stock I won’t be chasing at this point, but on the next heavy pull back, I can see getting back into it possibly if the price drop doesn’t seem warranted.

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