Today is witching day (options expire every third Friday of the month), so I have been busy this morning covering a short option position on Wells Fargo at $37.5. I definitely had not anticipated that this stock would shoot up 20% over two days. Yet in these days of socialized capitalism (as far as I understand socialized capitalism is a big component of fascism, but I will let the political scientists work that one out) where the government interferes in the free market, things go kinda crazy. Exercise for the reader: How crazy would things go, if they government did not interfere?

So back to the day trading. If an option is close to expiration and close to the money (this one was in the money by more than a dollar) it almost follows the market price but offset by the strike. These days even a heavily traded stock like Wells Fargo can jump 1% on a tick. How’s that for stability. This means that the options in particular go all over the place. Hence I have been sitting here with one tab open on google finance (this gives me running quotes), and one tab open on scottrade trying to adjust my limit order to be in the lower end of the range, so I can snatch up those who place market orders (a market order pays whatever is offered … really generous people). Scottrade is not the best platform for option trading (they only allow long calls, long puts, and covered calls, and nothing complex). Each trade also cost $7. They do however seem to have excellent execution. You will not be left hanging because the trader was out on a potty break, nor will you miss a trade. In many cases, you get what you pay for. For instance, free trades could translate into poor execution and larger spreads e.g. you’ll have a limit order on $10.00 and you’ll see the price dip to 10.00 but surprisingly your order did not go through. Then the price runs up again. This is very annoying!

Right, so I sold the Sep 37.5 call for 0.25 (stupid move, but it seemed clever at the time) and bought them back again at 1.05 which is a loss (ARGH) but still one of the lowest prices of the day (current range 1.00-5.00!!! See how insane this is?). Then I sold Jan 47.5 calls for 1.05, so effectively I rolled out and up, only I had to do it in two trades (this is why scottrade is hairy for these kind of trades). Of course this means that the December 1st dividend will not be qualified 🙁

Why 47.5? If Wells trades at that much, they will be paying less than 3% in dividend. This is too little for me, especially for a bank stock.

Now, if you’ll excuse me, I’ll go shout some expletives into a pillow.