Selling Covered Calls & Some Energy Cash-secured Puts

Summary

  • Trimming and selling covered calls after January rally.
  • Expect “higher for longer” interest rates and tighter financial conditions to take a toll as earnings reset occur the next month and into summer most likely.
  • See the Retirement Income Options Expiration Update for target trades on selling cash-secured puts for Plug & Play Stocks, as well as, Global Trends ETFs.

Each month at regular options expiration I will do a comprehensive update on option trades to target for the next several weeks. In between, watch for updates on current trade ideas that make sense to me. 

This week I am focusing on covered calls after the January rally. 

Covered Call Trades That Might Make Sense For You

A lot of us have a few positions that grew a bit too big for our asset allocation as we scaled in and averaged down. Rallies are a chance to lighten up on those stocks and ETFs so you can “right size” your asset allocation. 

In general, you will want to trim parts of your positions, but selling covered calls against a portion before a market weakens significantly is often a good complimentary move. 

Here are several ideas that you might want to use depending on where your asset allocation stands right now. 

  • Sunpower (SPWR) is highly volatile and selling a covered call now and a cash-secured put later might be a great strategy.
    • Sell March $20 calls for $1 or higher.
  • MP Materials (MP) is another volatile stock that I am up on, so I’m selling covered calls and might sell cash-secured puts later.
    • Sell March $35 calls for $1.50 or higher.
  • Unity (U) went profitable for me, but it’s a double size position, and since I own it in (ARKF), I want a bit less, but it’s not overvalued, so, I’m just selling covered calls.
    • Sell May $45 calls for $3.60 or higher. 

I think you can find a lot of ideas like that, especially for positions you deem bigger than you want. 

The ARK Fintech Innovation (ARKF) has run for us, so I am selling covered calls for half of the position in blended stock & ETF accounts, and trimming half in pure ETF accounts. 

  • Sell March $20 calls for a $1 or higher. 

I think it’s fine to cut your (EMQQ) position by 40-80% depending on you after the big rally. Be ready to buy it back on any double digit dip though. EMQQ is going to do well a long time and trading it comes with “run away” risk. That is, it could rally and run away from you. Act accordingly to where your greatest pain would be: giving back profits short-term vs missing out on a breakout to all time highs in the next year or three. 

Cash-secured Puts

A lot of the oily stocks are on mini-corrections. I think that could be a reload opportunity or an add opportunity. Oil prices aren’t likely to crater and U.S. companies are raising production judiciously, read as, in cahoots. 

Occidental (OXY) is close to $60 so I am selling puts on it to a double position, that is, 6% of NAV. Buffett loves it, it if drops he’ll buy it. 

  • Sell May $60 puts for $4.25 or higher.

Permian Resources (PR) is also on the dip and I have February puts expiring soon. I’m selling a new batch now. 

  • Sell April $9 puts for 50¢ or higher. 

Hope that all helped. 

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