I did something I don’t normally do. I jumped out of my entire RH Covered Call with a real nice profit. Normally I would hold until expiration. There are times when my accounts jumps up big in a few days and I’m tempted to jump out of ALL of my positions. Grab the profit of the winning trades and take the losses of the losing trades. In this situation I’m talking about the winners will be way ahead of the losing trades. I was gonna do it once in a while and call it “Cleaning House.” My account is up pretty big the last few days so I decided to give this strategy a shot, but not with all my positions, only my biggest. With 3 and a half days until expiration I got out of my RH Covered Call. I had 1500 shares of the stock and I sold 15 contracts just yesterday. The stock was up big the last few days. I bought my 1500 shares at different times at a average of $67.36 per shares. I just sold all 1500 shares at $72.40 for a $5.04 per share profit for a $7560 gain.
For the options part of the Covered Call, I sold the 15 contracts for $1.25, a total of $1875. Getting completely out of the Covered Call I had to “Buy to Close” this position which cost me $3.50 for a total of $5250.
I brought in $7560 on the stock sale, $1875 on the option sale and it spent -$5250 to get out of the option. If you do the math I’m ahead $4185. This trade is over and this money is already in my mattress!
RH Covered Call
7/5/17 – Buy 1500 Shares RH @ $67.36
7/18/17 – Sell 1500 Shares RH @ $72.40
+$7560
7/17/17 – Sell to Open 15 RH 7/21/17 $70.00 C @ $1.25 (+$1875)
7/18/17 – Buy to Close 15 RH 7/21/17 $70.00 C @ $3.50 (-$5250)
-$3375
Total Profit +$4185
Getting out of this position did a few things. It locked in the profit and my account will stay up without the very volatile RH stock. Im not saying I won’t be back if RH soon. I’m only saying, right now my account is high and profit is locked in. Another thing I did was making money available for more trades, tomorrow is only Wednesday. Also, not holding 1500 shares of RH is a lot of money not on margin. Don’t know how long I’ll be in this situation but right now I’m not paying margin on the RH money. If I held until expiration and the stock stayed above the $70 Strike Price, I would have made a little more money. However, there are no guarantee the stock stays above the $70. This is a very volatile stock. The extra money I would have made holding until expiration I think I’ll make with more trades and this profit is locked in.
Any questions, send me an email.
Steve
The Options Coach