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Another Option Expiry came and gone. Covered Calls Trading is bullish strategy. Guess what I was experiencing? You got it! Most of my positions were facing downward pressure, not pretty.

I said most of my positions because one position, Rent a Center, INC (RCII) to be exact was doing too well! Too well, what do you mean?
Those of you read about my RCII problem from my previous posts might recall after I sold 5 contracts of RCII $20 Puts, the share price suddenly dropped $2 to about $18 and threatened to keep on dropping to oblivion. My long put insurance saved the day though, and my loss would always be limited and several times I was tempted to exit the position entirely for a small loss.
Reluctant to face certain loss kept me in the position which could finish up in June when the insurance will expire, forcing closure of the position at a bigger loss. Decision! Decision!
My decision was to hang on. Right now, the positions look like this:
Short 5 RCII March $20 puts
Long 5 RCII June $20 puts

The twist was RCII shares slowly recovered and then hovered around $20 mark which was exactly how I liked it. I must have upset someone overhead when I celebrated too loudly! One day RCII suddenly jumped $2 to around $22. As an investor I have to protest vehemently! Why, because now I am gradually losing premium of my $20 put insurance prematurely. Why is my porridge’s temperature never just right? Lament a disgruntled investor!
Actually, if my closed my June puts and wait for my March put to expire worthless, I should achieved a small profits. But, as soon as I closed the long puts, I bet RCII will drop below $20 again, where will I be then?

No, I am hanging on, till March expiry at least. Let’s see what will happen!

Chunghwa Telecom Co. Ltd. (CHT) decided to do some re-organisations. I was not able to find out a lot about it. What happened did cause havoc to my CHT option trades. There has been no demand for both short call and put options at all. The final result of this trade is not going to be pretty, certain loss to be sure, but it should be limited though. A bit of tweaking of the strategy is called for.

As for the other positions of Yamana Gold Inc (AUY), iShares MSCI Canada Index fund (EWC) and the iShares MSCI Hong Kong Index Fund (EWH), several months of downward pressure rather killed off demand for call options for all of them.

After expiry, I just managed to sell the EWC March $17 call for $0.35. This should mean the bottom line of the EWC trade is going to be a tiny overall profit when the position closed at the March expiry. Right now I am long 5 March put and short 5 March call. My EWC shares will either be called away or I will exercise my long put contract, either way, the shares will be sold for $17. I calculated there will be a tiny profit of $85 for an outlay of $13500 for five months. This will be annualised to 1.6% hardly something to shout about. The main reason was EWC shares price hardly rise above $26 for the last few months so no demand for the $27 call, but loss of the position was always minimized.

Prospect of EWH is less sound and very unlikely to end in profit in June unless unexpected recovery to near the $16 level soon. Right now I could not even sell the April $16 call for anything worthwhile, the March $16 is on offer for $0.05. I will forgo the vacancy of this month unless there is change in the next few days.

AUY is looking to be very sick. It became a long term hold situation. I will sell the AUY $14 call whenever I can obtain a decent premium. There is a cushion of $2.15 per share profit from previous closed Covered Calls receipt. Hopefully it would be enough to help keep the nerve sturdy. Other than that, I have to rely on the yonder hills to have tons of Gold, Amen. I am also praying for AUY shares to stay above $11 at least until gold price revives! Oh dear! Owning shares without insurance is just not good for the nerves!

In my Forex Expert Advisers (EAs) evaluation front, one EA did not trade during last few days, but the other showed its virtual gain increased to $10000 to $12500! It is very early days!

This expiry period is best described as covered calls over troubled water. Why, because shares in three of my positions were in retreat. Covered call is a bullish strategy, they need to go up, but slowly though! Downward charge?! Most unpleasant!

One of them is charging up like a bull in china shop just when I was demanding for it to stand still!

Guess what the fifth one did? It was moving up slowly. It is just what I want, isn’t it? Right! Guess what? There was some sort of share re-organisation. I couldn’t find out a lot of detail for it. Now no one seemed to want its options just when I have vacancies to cash in for some income!

I will give details of all five positions after the Expiry in order I can or cannot get some more premiums from some of my option vacancies!

I can also say that I am planning to open another front, evaluating Forex Trading. Last two months I spent over $350 buying three Forex Bots, another name is Forex Expert Advisers (EAs) so that I can evaluate them using MetaTrader 4 Trading platform demo account (NOT REAL MONEY).

I can tell you now, one of them failed in the first hurdle!

One of them currently is showing a gain of over $10000 with a virtual capital of $100000. I can also tell you that it reached this gain before but then lost it all in one session. It returned to positive within one day.

The third one rarely traded but showing a gain of $7000 right now with a virtual capital of $100000.

I am affiliates to all three EAs but I would not recommend one of them. I will put the links up for the other two if I started trading with real money and start making money. I warn you I will only trade with change moneys until I am really, really confident.
It is early days yet! I mentioned it just to prick your interest! I won’t post too much on it until I start live trading.

In the meantime I will continue to march onward (not quite sure which direction yet!) with my Covered Call trades. Analysis of this month’s actual results in the next few days!

What an expiry day! It revealed my mistake of selling the Chunghwa Telecom Co. Ltd. (CHT) January 17.5 call! I will explain later.

Among my 5 open positions, Yamana Gold Inc. (AUY) and Rent-A-Center Inc (RCII) were not affected by the January expiration. Even so, I was closely watching the RCII options on offer in case any opportunity should manifest. There was none, no action taken.

AUY is still trending sideways, nothing could be done, so did nothing.

Of the other 3 positions, CHT gave me a big headache. I have to own up making a big mistake by selling the CHT January $17.5 call, banking on CHT shares to stay put, thus collecting premiums from both a short put and a short call option. It will cost me, read on.
My CHT position before expiry:
Long 5 June $17.5 puts / Short 5 January $17.5 puts
Long 5 June $20 calls / Short 5 January $17.5 calls
Two days to expiry, CHT was hovering around $18.40, well in the money for my short January $17.50 call. Urgent action was needed. The usual rescue would be to roll over the call to next month. When I checked the CHT call options on offer, I found I had fallen into my own trap. The problem was as below:
The underlining CHT share was trading Bid: $18.44 Ask: $18.45
The first thing I noticed was the February call has no time value at all, if anything, for a short period, the January 17.5 call option was asking for more money than the February call option, with the CHT January $17.5 call was asking for $1.25 as compared to the February value of $1.20.

I was clearly in a short squeeze situation. I can only assume there was quite a few short CHT $17.5 call open at the time, all had to be closed. The Market Makers knew that well and made good use of the situation. The Bid and Ask price spread was very high too, because the Market Makers knew all the demand would be on the buy side in order to close any short positions.

Although I was protected by my long $20 call, it was not helping any. There was a long gap between the $17.5 call and the $20 call compared to the share price. The very low volatility of CHT option also made matter worse. As a result the increase in the CHT share price did not increase in the value of my long June calls.

What could I do? Nothing much except bit the bullet and pay the price as the cost of a good lesson. From this experience I now learned that shorting both the call and put side was not a good idea. I decided to close out the call side of the position. The way I did that was to buy 500 CHT shares as soon as I could for $18.44 each. I could have left till the final moment of expiry but I was worried if I left it any later, CHT shares could rally further. It turned out, at expiry day, there seemed to be a market down day, I could have saved $0.12 or so per share. I could not have known that!

This mistake increased the net cost of my remaining CHT position from $0.46 to $1.44 with. Without a doubt, it is a severe setback. It might be difficult but not impossible for the position to close out in June in the black. Wait and see.

My next position is iShares MSCI Hong Kong Index Fund (EWH).
Long 5 June $16 put / Short 5 January $16 put.

Two days before expiry, EWH was out of money, just over $16, either way, I was not too bothered. If the share price remained over $16, the January $16 put would expire, creating a vacancy for next month’s $16 put premium in the region of $0.40 per share.
As it turned out, at the day of expiry, my screen showed all red and EWH fell to $15.71. My short puts were exercised at $16 plus cost. When market next opened, I sold 5 February $16 call for $0.35. I could wait for a better premium but I did not want to second guess the market.

My final position is iShares MSCI Canada Index fund (EWC). Two days before expiry assignment of my short January $27 call position was very likely. Next day, the situation was completely changed, EWC shares fell in the general market pull back. Either way, it would not have made a great deal of difference. If my shares were called away, I would have short the February $26 put for about $0.45 per share.

As it turned out, with the January $27 call expired out of money, I shorted the February $27 call for $0.55, I was expecting the net position to be in profit this month, unfortunately, I found I made a mistake in my previous calculation. After careful recalculation, I found the actual net cost of the position is definitely $27.15. If I can place either a call or put option for a premium of at least $0.20 after next expiry, the position will be in profit.

Conclusion, despite the market was trading the wrong way for most of my positions, the prospect is still reasonable. EWC position is in very good shape.
I am confident of EWH position too.
RCII is currently making a come back, not quite sure which way it will eventually go though.
AUY is currently in bad form, I shall hold on for as long as required.
CHT was hurt by my mistake. There is a vacancy for a $7.5 put to earn some income. I am waiting for better premium on offer before taking the plunge.