In yesterday’s post, I wrote a little bit about what I’ve learned while researching an options strategy of trading long puts against high volatility equities. Today, I’m providing a concrete example of the strategy and my thought processes along the way.

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As I’ve recently posted, I’ve expanded my trading strategies to include using long puts on range-bound equities exhibiting high volatility. Even though I’ve only completed two round-trip executions of this strategy, both using AIG, I’ve already come up with a few notes that I want to record for the future.

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October’s option expiration was this past weekend, and like last month, we had three covered calls in play that ended with this month’s expiration. Two of those got assigned (AIG and Intel) and one simply expired (Eastman Kodak), thus we did reasonably well in matching our maximum profit. But before I provide that summary, let me digress with a little summary of what we’ve learned so far in trading covered calls.

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So I’ve been watching AIG pretty closely given my current in-play covered call trade, and I’ve noticed that the daily highs and lows can be pretty large swings. I’ve also noticed that, over the last few days, it seems to be swinging through the same range of prices over and over again. Having just read about trading puts, I decided to dip my toe in the water by doing a long put with AIG.

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As you might gather from reading this blog, I’ve been doing lots of research into options and options trading strategies. I’ve just recently decided that it was time to position myself for the next step: putting what I’ve learned into use on more of my family’s investments. A large chunk of our portfolio is in Fidelity IRAs, so for me, this meant completing the paperwork to move over to one of them to a ThinkOrSwim IRA.

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