My BNI naked option ordeal

Burlington shareholders approve sale to Berkshire

I wrote 10 contracts of BNI strike 95 puts ending this month at 0.30.  Total premium collected minus commission was $280 but I think I had to have $19,000 cash in my account which works out to about 20% of the strike (95 x 100 shares x 10 contracts).  I had a margin call for the first time!

Oddly enough it went up to 0.45 at one time meaning I could have collected more money but my mind starts wondering..”Did I make the right trade?  What am I not seeing?”  This trade should be a no brainer but when leverage is involved,  you start to doubt yourself. 

Today’s close shows that it’s only worth 5 cents but I bought it back at 10 cents being the novice that I am to close it.   I just wanted it over and done with.  Reading the message boards, it indicated BNI shareholders could elect to convert to Bershire shares instead of $100 cash and the options would be converted as well.  Once the options turns to Berkshire, there would be another week before expiry and the stock  could go lower so why take the chance.  Total profit $160 using $19,000.  10% annual return (160/19000 x 12 months).  Not enough for the pain endured.  Maybe I’ll venture into covered calls.