Option Expiration December 2019

In december most of the positions I had were related to Dutch construction companies as there was a positive sentiment as a major stockholder of a Dutch construction company announced the intention to acquire the shares It not owns yet.

I decided to take open a few small short put positions on Dutch construction companies Volkerwessels, Heijmans and Royal BAM Group to benefit from a positive sentiment regarding construction companies.

In december I realized €317,15 in profits regarding my short positions.

  • Rolled 1x ABN P16.00 20DEC19

    I rolled this option to ABN P16.00 17JAN20 and received €10 more premium by closing this position by buying back the option for €82 and opening the JAN20 position for €92 premium.

    Timing of closing this position was slightly unlucky, because just a few days after rolling this position the stock price went up almost 4% going from a lot out the money to almost being in the money. ABN Amro closed at a price of €16,33 at expiration. The JAN20 postion to which I rolled this position also declined a lot to €20. So probably I will close this position profitable in JAN.

  • Closed 2x AH P23.50 20DEC19 – €103,40 loss

    Ahold Delhaize declined against the market. Where the general market went up after trade war tensions declined. I closed the position on a small uplift of Ahold Delhaize of over 2% with the intention to roll it to JAN20 after a correction. As the price of Ahold did stay on the same level I didn’t open this position again and took the loss.

  • Expired 10x BAM P2.40 20DEC19 – €101,50 profit

    In November I opened various positions regarding Dutch construction companies as I considerred the sentiment postive regarding construction companies. This due because a major shareholder of Volkerwessels announced the intention to place a bid on the shares it doesn’t own yet.

    I started my position by selling 10 put options for €11 per contract. BAM Group closed at €2,68, well above the strike price and expired worthless. This resulted in a profit of €101,50.

  • Expired 4x HEY P7.20 20DEC19 – €96,60 profit

    In November I opened this position by selling 4 options for €25 per contract. Heijmans closed above the strike price and this position expired worthless. As a result I realized a profit of €96,60.

  • Expired 3x KVW P20.00 20DEC19 – €222,45 profit

    In november I shorted 3 different kind of put options series regarding Volkerwessels and the news that major stockholder Reggeborgh planned to bid €21,75 per stock.

    On this news the stock price increased from around €18 to €21. As Reggeborgh was already owning almost 64% of the stocks I expected that a bid would get through and that the risk would be limited based on the price before the news in combination with the strike price and premium received.

    On the 7th of November I sold 3 different puts with a strike of €20 but with different expiry dates. For december I shorted 3 puts with a €75 premium. On 12 November it was announced that an bid supported by the management would be done against a price of €22,20.

    Based on this bid the premium of the 3 put series I shorted dropped to almost zero. The december puts expired worthless and resulted in a realized profit of €222,45.

    I have still have short puts with expiry dates in JAN20 and MAR20 left in my portfolio which I probably will also keep until they expire worthless.

The total profit I made this year from shorting put options increased this month by €317,15 to €2.973,25.

Option Expiration: November 2019

In november I basically closed my positions expiring in November early. As a result increasing stock prices in November I decided to buyback my November positions to realize the profit.

I also already closed a few positions expiring in December also to realize the profit. As a result of closing 6 positions I realized a total profit of €1.773,50. My total realized profit from writing options this year is now €2.656,10.

The 6 closed positions in November:

  • Closed 4x AGN P4.00 20DEC19 – €101,20 profit

    I opened this position in may for €35 per contract and now closed this position for €8 per contract.
  • Closed 10x AGN P3.90 15NOV19 – €123,00 profit

    This position was opened previous month against €17 per contract. I closed this position at €3 per contract.
  • Closed 2x ING P9.80 15NOV19 – €52,40 profit

    In October I rolled this position to November as it was in the money. On average I received €36 per contract and I closed this position against €4 per contract.
  • Closed 4x ING P9.00 19JUN20 – €433,20 profit

    I decided to close this position and not wait 8 more months for a few more percent of profit. I opened this position in December 2018 against €143 per contract and this month I closed the entire position against €33 per contract.
  • Closed 7x ING P11.00 20DEC19 – €618,10 profit

    This position I had for a long time marked as tricky, because it was deep in the money, because the shareprice of ING dropped from around €12 to €8 in August.

    Now the stock price of ING surged to well around €10,50, I decided to close this position.

    In September 2018 I started this position against €140 per contract and this month I closed the entire position against €50 per contract. I’m happy to take this profit and clos the position.
  • Closed 2x RD P25.00 20DEC19 – €445,60 profit

    This position I opened last year in November against an average price of €242,50 per contract. I closed this position this month against €18 per contract.

    I decided to buy back this december position as Shell had an ex-dividend planned on 14 november also and I don’t want this position in December to get into reroll zone.

I had a busy month this week in monitoring my option positions and closed many positions resulting in a record amount of realized profit which are all already invested into quality dividend stocks.

Option Income: Expiration September 2019

Last Friday the September option expiration date was. In September I rolled 3 positions to October and I closed 2 positions. The trades I rolled were all 3 rolled for a higher price and did result in a higher potentiol option profit to be realized.

The 2 closed option potitions resulted in €309,50 profit after transaction costs. My total realized profit this year is now €769,45.

The following 2 trades where closed in September:
  • 3x ING P9.40 20SEP19: profit €105,20

    I started this position in August. I decided to buy back the options a few days before expiry date, because the price of bank stocks increased a lot in the days before I closed this position. I closed this positions to not risk the options getting in the money again on a market correction.
  • 1x RD P26.00 20SEP19: profit €204,30

    This is a position I started in november 2018 when the price of Royal Dutch declined from around €30 to €26. Today the price is almost the same as when I sold this option in November a year ago.

    3 days before the expiry date I decided to buy back the options. The oil price increased a lot in the weekend before expiry as a result of the drone attacks on the Saudi oil installations.

    After closing this position I sold a new mid-term option on Royal Dutch. I did short 1 put contract RD P26.00 20MAR20 for €156.
The following 3 trades I rolled to October:
  • 3x AGN P4.20 20SEP19 rolled to 3x AGN P4.20 18OKT19:

    I bought back the 3 contracts for €35,45 after deduction of transaction costs. I sold the 3 AGN P4.20 18OKT19 contracts for €37,45 income also after transaction costs.

    Aegon closed friday at €3,86 so this series is almost 9% in the money and I don’t expect this position to expire worthless. Probably I will roll this position in October again, but I will probably roll it to a series with a longer expiration date with a lower strike price.
  • 10x AGN P4.00 20SEP19 to 10x AGN P4.00 18OKT19:

    I bought back the 1o options for €171,50 and opened the October position for €231,50. Current share price of Aegon is €3,86 so my target is to have a small price increase of almost 4% in October so this position will expire worthless.
  • 2x ING P10.00 20SEP19 to 2x ING P10.00 18OKT19

    I bought back the 2 options expiring in September for €62,30 and opened the October position for €86,3.

    Current price of ING is €9,73 so I target on having this position expire worthless in October.

Long positions pay out, eventually

The Irrelevant Investor has an interesting read about the percentage of time with negative returns.

This graph is showing that in the long run, most often, the stock market goes up and it’s profitable to go long in stocks. On the otherhand there is also a graph showing that when stocks are going down, they often go down a lot.

For me as stock investor the expectation that in the long run shares are a good investment is not knew, but especially the graph showing the percentage decline in the years that stocks did go down is telling me I should think about a guideline to follow whenever stocks are for example over 30% down.

Maybe this is a good time to write a long term put option or to buy a call option to cash in on lower stock exchange prices. At least at this moment it’s not urgent to think about this strategy, because the exchanges are still up.

It gives me some time to do the numbers and write down some rules for myself regarding option strategies to set up after stock prices declined. Writing down a strategy in advance always makes it easier for me to do solid investing instead of doing something without exactly knowing the risks.

Writing put options as a way to generate extra income, my doubts

At the start of this year I read about writing put options on stocks which I would like to have in my portfolio. The ratio behind this is that its a way to buy shares for a lower price than the current market price. This for example realized by writing options with a strike price close to the current share price. If you get assigned to buy the shares the price you pay is the strike price minus the option premium received. It’s of course also possible that at the expiry date of the option the share price is above the strike price of the put. In that case the option premium received is extra income.

Writing or going short on a put option means you sell someone the rigth to sell shares to you at a agreed price before the option expires in the agreed month. this means that I as seller of the option receives the option premium, but with the risk to buy shares at a lower price than the market price.

I did for example write 2 options Iberdrola €6,75 expirting in september 2017 at a price of 0,12 per share. Option contracts have 100 shares as underlying value so in my case I received 200 x €0,12 = €24 – €3 transaction fee = €21

If Iberdrola would be above €6,75 at te expiry date in september this €21 is extra income. If the stock price of Iberdrola would be below €6,75 I would be forced to purchase the 200 shares at the agreed price of €6.75. The net purchase price in this case would be €6,75 – €0,21 = €6,54. When I sold the options the stock price of Iberdrola was €6,87. Techincally this means that in July I ‘signed’ a contract to receive €21 or to buy Iberdrola shares with a 4,8% discount compared to the stock price in July.

In my eyes I would be happy with both. Receiving the option premium as a way to generate extra income would be fine to me, but getting forced to buy the shares of Iberdrola would also be fine to me, because its a position I want to increase in the near future.

When the options expired at the 3rd friday in september the stock price of Iberdrola closed at €6,729. This was below the strike price of €6,75 and I was ‘forced’ to buy the shares at €6,75. No harm done, because of the option premium I received my net purchase price was €6,54 so I increased my position in Iberdrola with 200 shares as I already planned today.

The only thing which is bothering me is that on the next monday after I got assigned the shares of Iberdrola the stock price increased and I decided to sell them at €6,781.

Selling 200 Iberdrola shares 1.356,20
Purchase 200 Iberdrola shares -1.350,00
Received option premium 24,00
Transaction fee options -3,00
Transaction fee option expiry -2,00

Profit 25,20

After closing the position I did go short on 2 options Iberdrola again. Again with a strike price of €6,75 but with an expiry date in march 2018. I received a premium of 0,40 per share and received after deduction of transaction costs €77 as extra income. I was happy to again be able to write options on a position i wanted to increase and generate income again.

After some days I only started to doubt my decission. In my eyes I’m not making a decission as value investor, but its more a speculative decission to write options. This is because I didn’t stick to my original plan to write options and keep the shares if I would be assigned at the expiry date, but sold them to again write put options for extra income while investing my monthly deposit in other shares instead using it to fund the Iberdrola purchase.

I will monitor myself (I hope) the next few months to see how I will act if I’m again assigned to buy shares.