CME Continues to Meander

This stock is moving sideways in a range between $350 and $250 a share (some range huh!). As it meanders along the October $310 calls we wrote a couple of weeks ago (for $12.80 a contract) are gradually loosing value as time decay takes its inevitable toll.

We wrote the calls when the stock was trading at $307.10 a share, so the position now looks like:

Stock:
Original Stock Price: 307.10
Current Price: 299.10
Profit / Loss: -8.00

Option:
Original Sale Price: 12.80
Current Price: 5.60
Profit / Loss: 7.20

This is one of the benefits of writing calls against stocks you own. The recent drop in the CME's price has been almost completely hedged by the options we wrote. The downside, of course, is that a large move upwards would see our profit capped above $322.80 a share on expiration day.

Right now, a large upside move is not looking likely, so we have two possible ways to manage the trade:

1) Hold until expiration (only 11 trading days away) and allow the options to expire. Then sell the November calls.

2) Buy the options back if they become very cheap, and then write the November calls.

Either way, we have added some nice income to a position that is moving sideways and would not otherwise be making us any money.