Please go to “Active Trades/Current Positions.” At the very beginning of that page I talk about Adjustment Trades.
On Monday I sold an RH 20 contract $95 Call for a $1 premium ($2000) to expire this Friday, 2/16/18. Yesterday RH went down and I was able to get out of that position by doing a “Buy to Close” with a 50¢ premium ($1000). Recap: On Monday I did a “Sell to Open” which is Sell a Call Option to Open the position. I sold this option for a $1 premium for a $2000 gain. Yesterday I did a “Buy to Close” which is Buy the Call Option to Close the position. For you Grasshoppers, selling an option is a Short Position. To close a Short Position you must buy back the option to close and exit the position. This concept is extremely important to understand if you want to trade options. It’s also important to understand if you only want to trade stocks. Most successful stock traders Long and Short stocks.
At this point of my Adjustment Trade I sold the option for a $2000 premium and I exited the position by paying $1000 leaving me with a $1000 profit. Just a few minutes ago I completed the Adjustment Trade by selling another Call. Today RH is up and I sold 20 contracts of the 2/16/18 $96 Calls for another $1 premium to bring in another $2000.
Sell to Open 20 RH 2/16/18 $96.00 C @ $1.00 (+$2000)
Let’s take a look at my Adjustment Trade and what I accomplished. I love to make trades like this when I’m dealing with a volatile stock. When the stock was up I sold 20 contracts of the 2/16/18 $95 Call for $1. When the stock came down I sold the option for 50¢, making 50¢ for a $1000 profit in one day. Today with the stock up I sold another Call. This time it was a 20 contract 2/16/18 $96 Call for another $1. With the stock going up and down, I was able to better my position and locking in a $1000 profit with another $2000 to be locked in when the Adjustment Trade expires this Friday. Not only did I lock in more profit but I was able to changed my Strike Price from $95 to $96. Since the stock is still below where I got in, I would rather not get assigned on expiration. The higher Strike Price will make it less likely to get assigned.
If RH closes below $96 this Friday I’ll keep my 2000 shares of the stock and make a total of $3000 in premiums for the week.
Please email me any questions on this Adjustment Trade.
Steve
The Options Coach