Yesterday I sold a 1 week Call on RH and received $1.00 as a premium on 20 contracts. Today the stock received an upgrade from Deutsche Bank to a buy. It opened up about $2 and was up most of the day. As the day got old the very volatile stock started down. While it was going down the premium of my Call was down to 50¢. I decided to put in a “Buy to Close” order at 20¢ to see if I can get out making 80¢ on the 20 contracts ($1600). I was just executed so I no longer have a Call on my shares with 3 days left in the week. $1600 locked in with a 1 day trade.
9/25/17 – Sell to Open 20 RH 9/29/17 $74.50 C @ $1.00 (+$2000)
9/26/17 – Buy to Close 20 RH 9/29/17 $74.50 C @ 20¢ (-$400)
Profit +$1600
You might ask, why did I “Buy to Close” when the stock was so far from my Strike Price? Well, it only cost me 20¢ ($400) and I locked in $1600. With 3 days left in the week, you never know what happens. The stock could go up $3 or $4 tomorrow, you never know. I could possibly get another Call sold or the stock could go up where I enjoy all the upside of the stock gain. If you have any questions, send me an email.
Steve
The Options Coach