There haven’t been any adjustments to the GLD inflation position over the past month as GLD prices have remained relatively unchanged. However my October short Calls expired on Friday so I rolled them out 2 weeks to the October 30 expiry date and at the same $185 strike. I am hoping that, at that time (a few days before the US elections) volatility might be at slightly higher levels and that I might be able to sell higher premiums. The position(s) now look like this:
For the long calls expiring in March 2021:
and, in tabular format:
where we see $2,445 unrealized profit with $115 risk. Note that the 2 x $185 Calls were rolled for a net credit of 0.42 per contract ($84).
For the long Calls expiring in June the picture looks like this:
and, in tabular format:
Remember that this portion of the position was opened at the worst possible time – at the ~$194 high in August 🙁 . Unrealized loss is $$778 with $2,288 maximum risk.
Combining the above we have $1,667 unrealized profit with $2,403 maximum risk. This is slightly less (unrealized) profit and less risk than at the last review/update (https://itawealth.com/gld-options-inflation-play-03-september-2020-update/)
Update: 20 November 2020
With my November $183 strike short Call Options expiring Out-Of-The-Money (OTM) on Friday I rolled out to the December 18 expiration and sold another 3 contracts expiring at the same $183 level. I was able to sell these to bring in a net 0.81 credit ($243 on 3 contracts). This reduces risk by an equivalent amount and leaves my positions looking like this:
For the position using long Options expiring in March:
the position has no risk ($301 credit) and is presently sitting with $2157 unrealized profit.
The portion of the position that uses long Options expiring in June is not looking quite as healthy (due to the worst possible entry date) but is still ok with $2085 maximum risk and $914 unrealized loss. If I can continue to bring in ~$250 per month in premiums between now and June this will add ~$1,500 in additional credits – plenty to cover the current unrealized losses.
The risk graph looks exactly the same as in the above figure – but displaced to the left to reflect the current loss.
The total (net) position is therefore currently showing $1,243 (unrealized) profit with $1,784 maximum risk – or a 70% return on risk.
Since this was always intended as a longer term hedge against inflation I will continue to hold at least until the expiry of the long Options.
Update: 14 January 2021
Although I forgot to update this post (apart from the notifications in the comment section) when I rolled my short December Calls out to the January expiration these Jan Options are expiring tomorrow and will expire worthless being well Out-Of-The-Money (OTM). I have therefore rolled again to the February expiration series using the $180 strike Options. This brings in another $480 (on 3 contracts) to further reduce risk.
The risk graph for the portion of the position with long Options expiring in March now looks like this:
and cannot lose money having been placed with $881 Credit. Unfortunately the portion of the position anchored by a long Call expiring in June does not look quite as healthy with the long call being purchased at the worst possible time (Aug high):
However, this has another six months in which I can sell more Options against the position.
At the present time, total (unrealized) profit on the combined position is $979 with $914 maximum risk. This risk will be reduced further (probably completely eliminated) by the June expiration and the position should be profitable – hopefully at least $2,000.
Although Gold showed an increase in value between March and August it has given back ~50% of that gain in the past ~5-6 months. This position was designed as a long-term inflation hedge so I will keep it until the expiration of the long Options in March (2 contracts) and June (1 contract).