Shifted HD hedges to XHB

Yesterday, my GTC order to buy to close +HDCZ (HD Mar 32.5 call option) for 0.05 hit. This was a covered call I sold on some HD stock I was assigned from previous put selling at the 32.5-37.5 levels. At 0.05, it was not a good hedge and wasn't earning me much time premium. Given that HD reported today, I figured I'd want to get the upside if there was any. There wasn't and the reason I was able to close the options yesterdays was because other people already knew that and the implied volatility had fallen. Either way, I am just following my risk management plan.

I have been wanting to short some XHB for a while now but they are hard to borrow. So yesterday, I tried to sell some XHB Mar 21 call options naked at the ask but that didn't work. And for the first time in a while, luck was on my side. Despite more nasty economic numbers, we get another 6.4% gain in XHB lead by gains in HOV and LEN. So I sold a few front month call options naked at the 22 strike for around 1.50. This should give me a short position at 23.50 which is a little below the 200 day moving average. I haven't done much shorting before so I am just playing around. I figured that with my housing heavy portfolio (CBG, HD, BBBY), having a bit of a hedge on XHB couldn't be that bad.

I also tried to sell some April 65 FWLT puts (idea stolen from here) for 3.90 but it didn't execute. I like going long after a big drop but I have learned from experience. Stocks that fall hard tend to fall slowly afterwards. Often, you'll get another chance at the current price some time later or at a better price. So, I wasn't too eager to buy on an up day. But I will try again tomorrow, if it keeps dropping. 61.10 is an ok breakeven price for FWLT but not the sort of value I am looking for. For example, it is not as good of a value as AEO at 15.

I am practicing market discipline right now and keeping buying power high while hedging any of my positions that hit near term highs. I want to get out of as much stock as I can while maintaining positive delta. If EMC keeps going up, I am going to sell calls on my stock and start closing the puts I recently put on.