Tuesday, June 23, 2015

Finished a $700 project three days early

Let's see if anyone can look at this and see what I did. I'll give you a few clues (the only ones I understand. No, really, I know what I did, but I will tell you that I had to do some fancy stepping and then I got greedy and then I got out, and it turns out I could have done half the work and come out in the same place.) So, take a look:



Quick rundown: (this is not necessarily in order, even if it s numbered.)

1. Wrote naked 91.50 calls.
2. Bought shares at 91.30 to ensure that those would be covered, should shares be called away.
3. Wrote naked 93.00 calls.
4. Bought shares at 92.90 to ensure that those would be covered, should shares be called away.

Then I saw the stock run up to $96 or so and got greedy. Deciding to close all of it out at the same time, I did this:
5. Sold the shares that had been at an average price of 92.09 for 95.99, for a nifty profit of over $3K.

Then the prices of those options rose quickly (and I mean within seconds of closing the shares) and I did some cursing. Watched the prices a while, and finally decided I could roll those calls by buying them back at a loss (which still gives me an overall profit, when you combine it with the proceeds from the shares, but the profit is really just about exactly what I would have made from the first set of short calls - the $91.50 ones! It's like the 93 calls never happened. But look at all the steps I took, that I didn't need to take.

I should not be complaining. I made the $700 or so that I set out to make for this Friday, but I made it several days earlier, and I got rid of the risk of holding this highly volatile ETF. I have neither the risk of being taken to the cleaners via naked calls, nor the risk of taking a gut-punch to my account value via falling share value.

And it's just as well that the 93 calls are done away with, also, since the share price has surpassed that strike, and I didn't want to waste time and margin set-aside just to wait until July 2 to make an additional $900 (which is good money, and worth waiting for, but I think I can do something that is currently out of the money.)

 Now I have nothing, and I can go on to the next trade. Which will probably be short calls at a higher strike. When I say I have nothing, I mean that my slate is clean, but at least I wrapped all of this up for the same profit I set out to make when I opened the initial trade, which is the first one you see listed there (the short 91.50 calls written for a total of just over $700.)

No comments:

Post a Comment

Say what you think about this.