Yesterday I sold a 10 contract 12/1/17 $102 Call on RH for a premium of $1.10 for $1100. I already owned 1000 shares so this was a Covered Call. This morning RH went up a few points than came back down. A few minutes ago the stock went below $98 and my Call’s premium was down to 45¢. Yesterday I sold for $1.10 and I just bought back for 45¢ ($450). Brought in $1100 and bought out for $450. A quick $650 profit. If the stock goes back up tomorrow I’ll try to sell another Call.
11/29/17 – Sell to Open 10 RH 12/1/17 $102.00 C @ $1.10 (+$1100)
11/29/17 – Buy to Close 10 RH 12/1/17 $102.00 C @ 45¢ (-$450)
Profit +$650
Steve
The Options Coach
Do you have a Rule of Thumb on when you cash out early ? For example do you always cash out a quick 50% profit and reduce risk rather than wait it out ?
Obviously that Sale worked to your advantage today but who knew it would ?
Too often for me, it is usually “The hog gets slaughtered”, a day like today I am looking at the profit that could have been…..
Yes, if I can do a “Buy to Close” the same day or the day after I sold the Call, and keep 50% of my premium, I like to do so. Also, it’s important that the expiration day is still a few day away. I want to at least have a shot at selling another Call. If there’s only a day left to expiration, I’ll probably hold out and keep the entire premium. Every situation is different. You must know, and be familiar with your stock, and know how it moves. I’ve been in RH a long time. When it was down and I was able to do the “Buy to Close” I had a very strong feeling the stock would return up within the next day or 2. As you know I originally sold the Call with a premium of $1.10 and did a “Buy to Close” for .45 making a .65 profit for $650. I sold another Call with the same Strike Price today for $1.15 bringing in another $1150. If I get the opportunity I like to go in and out like this. If I did’t get to sell another Call, I still would have had the profit from getting out with the “Buy to Close.” This in, out and back in with RH worked out perfectly.