This morning I chose to close a short position in a put option contract of Next Era Energy (NEE). I really like NEE and want to add it to our portfolio but our put option contract (strike: $70; expiration 15JAN2020) was just four percent from the market price, $72.90, with six weeks to expiration. After holding the position for 37 days, we closed for a profit of $113.61 or 1.6%, 16% annualized, of the $7,000 used as collateral for the short position.
I have issued a limit order to roll out and down the position but the order has not been filled as I type this update. Given NEE’s strong year-to-date performance, the low market interest rates driving yield seeking investors to NEE and other utilities, and overall market exuberance for the past eight months, I’d prefer to initiate a position in NEE at a lower cost basis. NEE also does not have many options available for trade. The market has NEE options expiring on 18DEC2020, 15JAN2021, and 19MAR2021; a February 2021 expiration, as opposed to March, would be much more attractive. Our portfolio will have exposure to NEE within the next four months but current entry points are not desirable.