Expired Options (January 2020)

 

Several options I'd sold were slotted to expire on Friday, 17 January. Some of them were in the money, meaning the options would have been assigned if I didn't take any actions.

In this article, I provide a summary of the actions I took to avoid assignment and I present potential replacement trades for the expired options.

When options expire, the obligations I have related to those options seize to exist. For puts, there no longer is a chance that I would have to buy shares and the margin that was set aside as collateral gets released. For covered calls, there no longer is a chance that my shares will be called away. I consider the options income associated with expired options to be secured

Recap

Here is a summary of the options that would have expired on 17 January, as presented in December's Options Update article:

Four call options and one put option I'd sold traded in the money, while a few traded out of the money with small safety margins. In the week before expiry, I reviewed all of these options and determined what, if anything, I needed to do about in the money options.

BEN

On 15 January, Franklin Resources (BEN) traded between $25.00 and $25.37 per share, well below the $30 put options I'd sold. To avoid assignment, I rolled forward the options and lowered the strike price.

 Symbol

Date

 Qty 

 Proceeds 

 Comm. 

 BEN 17JAN20 30.0 P   2020-01-15 

 3

-1,413 

-0.23  

 BEN 17JUL20 27.5 P   2020-01-15 

-3

978 

-0.26  

Buying back the puts cost $1,413.23, so I relinquished secured options income of $1,152.23 when accounting for the $261 originally received for selling the puts. On the other hand, I sold three $27.50 puts expiring in July for $977.74, somewhat offsetting the loss. Including commissions, this trade resulted in a net loss of $435.49.

With BEN closing at $25.74 on options expiration day, the new puts remain in the money. However, now I have six months to see how things develop.

CMCSA

Comcast (CMCSA) traded between $46.01 and $46.28 on 15 January, well above the $45 covered calls I'd sold. To avoid assignment, I rolled forward the options and simultaneously increased the strike price.

 Symbol

Date

 Qty 

 Proceeds 

 Comm. 

 CMCSA 17JAN20 45.0 C  2020-01-15 

 2

-256 

-1.49  

 CMCSA 17JUL20 47.5 C   2020-01-15 

-2

402 

-1.50  

In this case, I managed to roll forward the options for a net gain. I secured options income of $135.93 and collected $400.50 in additional options income, net of commissions. The trade resulted in a net gain of $536.43.

CMCSA closed at the money on 17 January at $47.50 per share.

D

Dominion Energy (D) traded between $82.13 and $82.99 on 15 January, well above the $80 covered call I'd sold. To avoid assignment, I rolled forward the options and simultaneously increased the strike price.

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Disclaimer: I'm not an investment professional or a licensed financial advisor. This article represents my personal views and decisions, which may not be appropriate for other investors. ...

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