Disposition for MCM February open positions.
First, let's look at the issues that should expire worthless and should not be an issue tomorrow.
The following issues should expire worthless tomorrow, unless we get a visit from "Murphy's Law" tomorrow.
These are the issues that should expire worthless tomorrow on the put side:
AAPL ( 75 pts out of the money )
ABX ( 1.17 pts out of the money )
FDX ( 7.50 pts out of the money )
MYL ( 3.60 pts out of the money )
NKE ( 8.66 pts out of the money )
OXY ( 4.33 pts out of the money )
SODA (3.16 pts out of the money )
UTX (5.77 pts out of the money )
MCP (1.14 pts out of the money )- This represents the put side of our iron condor on MCP.
These are the issues that should expire worthless tomorrow on the Call side:
RIMM ( 2.61 pts out of the money )
SCHN ( 3.59 pts out of the money )
MCP - ( 2.86 out of the money ) - This represents the call side of our iron condor on MCP.
These are the issues are out of the money but have been in and out or the money in the last
few days that hopefully expire worthless tomorrow on the Call side:
DTV ( 0.62 pts out of the money )
These are the issues are out of the money but have been in and out or the money in the last few days that hopefully expire worthless tomorrow on the put side:
JOY ( is only $0.06 out of the money ) and we will have to watch this
issue closely tomorrow. If it opens to the up side we need to monitor it and be prepared to close the short
85 put if it breaks the short 85 strike. Of, course if we open down we might have a tp close the position
before the close. However, if we are forced to close out this position we may look to roll out the
JOY position out to March by closing out the February position and selling a March put spread at an even lower
price and either we will recoup some of the loss out to March, or depending on where the stock ends up, if it
looks to close in the money, we might breakeven by rolling out. REMEMBER: JOY could still close above $85 tomorrow
and we would have to do nothing. However, that remains to be seen based on the market activity tomorrow.
This last group of positions are the ones that we will more than likely have to close out at a loss
or roll out to the next month expiration cycle (March).
Here is the position on the put side
MON - ( is currently 0.99 pts in the money ), if it remains under $80 going into the close
tomorrow we will have to close out the position.
If MON is $0.50 or less in the money nearing the close we will close it out and we will evaluate whether we
recommend a roll out position for March or not. Either way if MON is in the money, it must be closed out tomorrow
before the close.
However, if MON should look to close above $80 tomorrow ( which there is a slight chance ),
then there is no reason to have to act all as a close above $80 on MON would result in the FEB $80 MON put expiring
worthless. But only if it closes above $80. Remember even if a issue closes only $0.01 in the money it will be exercised
and you will be put stock to you that you may not want, so unless you desire 1,000 shares of MON at the close
tomorrow besure this position is closed out tomorrow if the stock is going to close below $80
Here are the two (2) position on the call side
SWN closed at $35.60 - Is currently $1.60 in the money against our SWN FEB 34 call.
We have several alternative with this one.
First, we close the position tomorrow at the close if it looks to end up in the money at the close tomorrow.
Second, we close out spread near the close ( if the stock is still $1.60 or more in the money )( or at least be
sure to close out the short 34 call.
We than would place the following call spread on SWN out in March:
The only problem is we don't know what the premiums will be to close out SWN tomorrow , if necessary and we don't know
what credit we will receive for the March put spread.
However, we do know this.
If we roll out to the March 39/42 Call spread, the current market at the close today was a NET CREDIT OF $0.51.
considering we received a NET CREDIT of $0.30 for the original FEB 34/36 Call spread and we could get a NET CREDIT of $0.51
for the March call spread. That would give us a NET CREDIT of $0.81, so we can get the option to expire in March we would
have reduced out NET LOSS from $1.60 down to a NET LOSS of $0.79.
additionally, if you wanted to add a credit spread on the put side we could pick up an additional NET CREDIT of $$0.31
for the March 31/28 put spread, which would now reduce out loss to $0.48.
And Finally, if we double the number of contract from 10 to 20 on both sides of the iron condor, we would
have a NET CREDIT of 2 X $0.51 = $1.02 on the call side and a NET CREDIT of 2 X .31 = $0.62 on the put side
giving you a total NET CREDIT of $1.62, added to the original Feb 34/36 spread of $0.30 would give you $1.92, so you now have your original profit back of $0.30
if the stock closes between the call spread and the put side of your iron condor in March. That means SWN would have to close between
31 and 39, with it currently trading at $35.60.
This option is better evaluated tomorrow.
Even if you decide not to utilize this rolling strategy, you must still close out SWN if it looks to close above $34
( currrently at $35.60, which in al likely hood it will.
You can also decide just to close it before the market closes and then re-evaulate whether you want to roll it out
to March. But remember if it looks to close in the money you must close it out before the close tomorrow or you will have stock called
away from you that you more than likely do not own, and then you would have to go to the market to get it to deliver it.
So just a remember, as with any or the positions, you have to close it out BEFORE the close if it is going to
finish in the money. If you are not going to be homw you can put in a MARKET ON CLOSE order and that way if you are not around
the short position or spread will be closed before the market closes.
As noted above I have put BOTH the March call roll out and the March Put Roll out if you elect to do it.
The downside is that you may have to roll out again if the come after the call or the put side for March.
SUGGESTION: I don't recommend it, but some individuals go out several months and get more premium to offset the loss and in some cases
actually end up with a profit, however the problem is that you have to stay in the position longer to get your premium, however
the postive aspect is that you may be able to close out one of both of the sides ( depending on where the price of the stock is
) before the expiration if enough time decay has occured.
Just a thought. I believe you are going to roll than you give
the buyer as little time as possible to control the option.
Final position in the money on the put side is:
COG closed at $35.48 - it is currently $0.48 in the money against our Feb $35 call.
The easiest solution would be if the stock closed down $0.48 tomorrow, but we can't pre-suppose that, so we
will look at two (2) options:
First, we could just close out the option if it ends up in the money and pay the DEBIT on the short side
to close the option out, unless of course the stock looks to close below $35 tomorrow at the close, which
it is most likely not to do, unless we get a $0.48 drop tomorrow
Second alternative is to roll oout the COG FEB call by buying it to close ( at whatever price it is selling at
if it is in the money and rolling out to the COG MAR 40/42.5 Call spread which was selling at the price below
at the close today:
Since this position , at least at the close on Thursday, was only $0.48 in the money, the price that we
have to close it at, if we have to close it, could be a breakeven if can close it out for $0.35.
So even if we have to buy COG back tomorrow, we have a $0.35 so that means a close of around $35.35 would be a breakeven.
So if you do not want to roll this position out and try to dealy the payoff until March, you can just close it out
and buy it back before the close or it you are going to be away with a MARKET ON CLOSE ORDER.
If you desire to roll out the position, here were premiums for the MARCH 40/42.5 Call spread based on Thursday's close.
If the stock goes lower , we will have to pay more to close it out, but the MARCH roll out will give us more premium also.
If you just want ot close it out, if the stock hangs around where it closed today, you can do that and be finished with
the position and go on to MARCH. Especially since it is currently only around a $0.15 - $0.20 loss at current price
we will have to wait until tomorrow.
March 40 / 42.5 Trade below.
As a reminder: If any position should look to close in the money against any of our short positions, you must
be sure to close out the position before the end of the trading day tomorrow or you will be assigned stock or have
stock called away from you.
If you can not be near a computer and you feel you will have to act before the close. You may enter a
MARKET ON CLOSE ORDER on any position you feel that need to be acted on.
Also remember if a an issue looks to close out of the money, you need doe nothing.
If you do not wish to roll over an of the position we discussed , you do not have to. But you must close out
the short position before the close of trading tomorrow.