Thursday, December 18, 2008

Closing Out More Dec. 08 Shorts at Losses

I enjoy playing with fire, so I expect to get burned once in a while. Today I noticed that the market price of IWM exceeded the strike price of the short call I had sold at 48, so I decided to buy it back at a loss. I also bought back a short EFA call, although its market price hasn't quite reached the strike price of 46. I'm still holding my short call on SPY at 94 in the expectation that it will expire worthless tomorrow.

Here's a thought. IWM (U.S. small caps) and VWO (emerging markets) are clearly more volatile than their big cap friends EFA and SPY. In the future I'll try restricting my uncovered options on IWM and VWO to those that are at least 20% out of the money. I had only been going out to 15% up to this month, and in a market this volatile that was probably going to get me in trouble.

This was not a good month for most of the Alpha-D portfolio's uncovered calls.