Dick’s Sporting Goods (DKS) earnings were reported yesterday. The earnings were pretty good but the company’s “guidance” for the coming year was not so great. Read my page on Earnings Report. As you might know I don’t like being involved in a stock when earnings are due out. The earnings report in the #1 news item that can come out on a stock, and this news can “make or break” a stock in the near term. For this reason, I feel it’s gambling to sit through the earnings announcement while having a position in the stock. I bought 1000 shares of DKS back on Feb 13th and sold a Call to expire that same week. At the time, I felt the stock was going to be assigned and the deal would have been over. Well, I wasn’t assigned and when I went to sell another Call for the following week I realized the stock only had monthly options. When I sold the first option on Feb 13th I didn’t realize it because when I sold that Call there was less than a week left to expiration on that option and I was only looking for a 1 week option. I hope this makes sense! if not send me an email and I explain further.
At this point I had a stock which was a little lower than my purchase price so I sold another Call, which was a 1 month Call. And that 1 month Call took in the earnings announcement. With this earnings announcement yesterday, the stock came down over $4. I sold this Call for a $1.60 premium. With the stock falling, today I decided to “Buy to Close” the position because the premium was down to 10¢, with over a week left to expiration. As I write the stock is up over $1.40 today. I’m hoping for the stock to bounce and I’ll get another nice premium for next month’s Call in the next few days. However, for now this deal is over. I sold for $1.60 and I bought to close the position for 10¢. On 10 contracts (1000 shares) that’s a $1500 profit! Take a look at the “Sell to Open” and “Buy to Close” orders:
Sell to Open 10 DKS 3/17/17 $52.50 C @ $1.60 (+$1600)
Buy to Close 10 DKS 3/17/17 $52.50 C @ 10¢ (-$100)
Profit +$1500
At the moment I own 1000 shares of DKS which is about $3 below where I bought. I think it will come back, it’s a good company. It’s just a matter of how long it will take. When it comes up a little more I’ll sell another Call.
I would like to welcome the new readers. I hope I can convince you I’m not into teaching on this site to get money from you. I make my money trading options and I love teaching anyone who wants to learn this game. Keep studying, be careful and send me any question you might have. Coachsjc@gmail.com
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Steve
The Options Coach