I’ve owned 2000 shares of Advanced Micro Devices (AMD) for a while now. On these shares I’ve been selling Calls and bringing in nice premiums. On 9/1/17 I sold 20 contracts of the 1/19/18 $15 Calls for a premium of $1.20. These 1/19/18 Calls are considered LEAPS, long terms options. On 9/20/17 I bought another 500 shares and on 10/12/17 I sold another 5 Calls with the same Strike Price, expiration date and premium of $1.20. At this point I owned 2500 shares of AMD and have 25 contracts of the 1/19/18 $15 Calls sold.
Yesterday AMD announced earnings and today the stock is down. The earnings were good but AMD gave a poor 4th quarter outlook. With the stock down, the $1.20 premium I received, was down to 49¢. When I sold with the premium at $1.20 I received a total premium of $3000. Now that the premium is down to 49¢, I was able to do a “Buy to Close” for a total of $1225. I sold for $3000 and bought back for $1225 for a total gain of $1775. There was still 87 days until expiration so I felt it was a good time to get out and lock in profit. If the stock moves back up I can have another opportunity to sell another Call.
Sell to Open 25 AMD 1/19/18 $25 C @ $1.20 (+$3000)
Buy to Close 25 AMD 1/19/18 $25 C @ 49¢ (-$1225)
Profit +$1775
I love buying to close and locking in profit! Especially when there’s a lot of time left until expiration.
Steve
The Options Coach