BA, WMT, AAPL – Earnings and other stuff

A month ago, on June 23, we began a new position in Boeing (BA). Over the last month we have placed 87 orders and had 35 fills in BA. The trades have been a combination of naked puts, rolls, calls and stock. We are now up $6300 for the year, so our efforts have made us about $1000 in the last month. BA reports earnings on August 8, so volatility is rising fast now and forcing option prices up. Partly because of this our daily decay is now up to $265. We are long 400 shares, short 5 puts at 4 different strikes, and also short some ITM calls. Taking advantage of today’s drop, we sold a couple of new puts to bring our number of potential long shares (if all puts get exercised) up to 900 shares. We like to be around this number for most positions, sometimes getting up to 12 or even 1500 shares, but rarely more.  It’s important that you always think about naked shorts as if you could wake up tomorrow owing those shares (it happens!). Would your account have enough cash to pay for them or would you be into a margined position? At DeepPocketOptions we avoid margin loans at all times. Stay away from danger and manage risk for income. Our BA position will most likely be left alone now until after earnings. The market’s reaction to earnings reports is unpredictable, so we try very hard not to be in a position where a big earnings-related move can hurt us.

WalMart – We have been working through some losses on this one due to it’s extreme bear market (see other blog posts). In late June we were down $5000 for the year, we’re now down $3500 since Jan 1. Our daily time decay is $40, so we are earning about $1200 a month. Also, WMT will pay a 49 cent dividend on August 8, so we want to keep that in mind and try to collect it. This is a covered call position and we are short the weekly 73 calls, expiring next week. Over the last month we have made $1500 as the stock has stayed basically flat between 72 and 73. The plan is to leave this one alone until after earnings and hope to collect a good amount of option premium and the dividend. Patience has been needed with our WMT position, and that continues. If we can pull in $500 to $1000 a month from now on, this will be working like we want it. The WMT series of trades has taken quite a bit of extra time to settle into an income position because the timing was bad at the start. We got into WMT right as it began a long slide and that just does not work for what we do. Sometimes things go bad, but the great thing about an options portfolio is that you can fix it over time.

Apple – We own some shares as a covered call position and are up another $1000 since late June for a total of $3900 year to date.

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