March madness with SPY and SPDRs

  The ex-dividend date on SPY is always an interesting time.   The date itself is almost a trade secret.  Finding it almost always involves a trip to the Amex web site.  The amount of the quarterly dividend is a secret to be revealed later--I'm guessing about .60 per share (update -- regular dividend of $0.56143).  Without a doubt there are people with sharp pencils adding this up every quarter, because if nothing else the options traders need to know before the Amex delievers the number after-the-fact.   Effectively all the in-the money options were exercised.  Buying lots of stock a day or two before and selling in the money calls with premium comparible to the dividend is an interesting and profitable exercise--provided the stock doesn't do a major tank.  Worth a short term investment in VIX calls?   I'll have to look at how much leverage is present there, and how symetrical the rally vs drop-off behaviours are.  

   The Friday before options expiration is also interesting.  There's an attractive amount of premium available on the at-the-money (ATM) calls.  Yesterday I spent quite a bit of time closing out out of the money calls (OTM) calls and writing slightly in-the-money (ITM) calls.  Since it was a down day I would been better off just closing out the positions early, but that's just hindsight.  I think I was able to offset about half the losses with my activities.  That would be a good exercise to work through--to find out if that is correct amount I saved.     It is also interesting to think about using temporary VIX positions to offset the risk in this.   The VIX upticked about 3 points this Friday. 

    As it turned out, SPY closed below the strike price on the options I held, so I have market risk on a lot of stock on market open Monday.   Right now I think there is more downside risk than upside, so I am not just reflexively going to write calls on Monday morning.   

 The 3 day settlement time is a real pain in the IRA accounts.  With the potential of options being exercised I need to be very careful to not run into "free ride" restrictions. 

    Buying SDS to hedge the SPY position does not work because any price movement above the strike price is not hedged (the option when ITM already nets that out). 

    Right now I am thinking that just passively writing covered calls is not going to deliever superior results--you miss out on the big up swings without enough downside protection.   I like the idea of playing the short term volatility better, or potentially doing a delta hedge using SDS but biasing things towards the upside.   

A stock that won't go to zero

   There are several ETFs (USO, OIL) that are designed to track the price of oil.  An interesting thing about oil is that it will never go to zero.  In fact, it is hard to believe that it will ever drop much lower than it is right now.   Given its limited downside it seems like a good defensive investment. 

12- March  USO  Debit 25.46   April 30 call  stk 26.33  option .87   IV 63

21-March  Stock is now at 30.81   Credit to close out  28.25  --gain of about 2.75.  As usual, when the stock goes up, it is always a time to wonder if covered calls are such a great idea--I would have had a gain of 5.35 without the call.