I issued an alert earlier this week closing out our open short put positions in General Electric (GE), Xerox (XRX), and H&R Block (HRB). As I said then, “I am concerned that this week’s increasing volatility may trigger a ‘flash crash’ next week.”

For the same reason, I am canceling our open short put orders for Abbott Laboratories (ABT) and Prologis (PLD) since they have an expiration date of November 16. If the stock market does experience a steep decline this month, these stocks may fall below their respective strike prices without enough time to recover.

That still leaves us with three open short put positions expiring in November: American Electric Power (AEP), Macy’s (M), and Western Union (WU). Of those, AEP is currently trading above our strike price while Macy’s and Western Union are below their strikes. We still have five weeks to go before they expire so it’s too soon to take action on them.

Also expiring next month is our covered call on Buckeye Partner’s (BPL). We wrote that contract two months ago while BPL was trading near $40 for a premium of $1.25. Since then, BPL has dropped below $36 and that option can be bought back for less than a quarter so I’m closing out this position now and booking the $1+ gain.

The energy sector is selling off along with the overall market even though oil prices remain above $70 a barrel and global demand for oil is still on the rise. When BPL reports Q3 results during the first week of November, I expect those numbers will drive its price higher. If so, we can sell a new covered call against it then at the same $40 strike price and collect another premium.

The combined effect of all the transactions this week is to limit our downside exposure until the current stock market correction settles down. We’ve made a lot of money this year, and I see no sense in risking giving a lot of it back.

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