I had one trade that came to a conclusion last week. This post will serve as the “Results Week Ending 6/15/18” and in addition I’ll talk about Opportunity Lost.
I’ve been holding 500 shares of RH which I purchased on 1/23/18. These shares I bought for $104.25. On 6/4/18 I bought another 500 shares at $100.40. I bought the second 500 shares because the earnings report for RH was coming this past Monday and I wanted to play the earnings with 1000 shares. To keep it simple I will average the two 500 shares purchases and call it 1000 shares at $102.32.
Knowing the earnings report was due out on Monday 6/11 I sold a 10 contract Call on 6/5. This Call was to expire on Friday 6/15. I felt the earnings were gonna be good, and I also felt the stock was going up, both before and after the report. I wanted to pick a Strike Price which would give me a nice premium but would also be out enough so if my prediction was correct I would make a nice gain on my 1000 shares of the stock. When looking at the option chain I really liked the $115 Strike Price. It had a great premium of $3.40, plus it was out to $115, so if assigned I would make a real nice profit on the stock sale. I went with this Call. I sold 10 contracts of the $115 Call for a premium of $3.40 for a total premium of $3400.
I sold the Call on Tuesday and the earnings report was coming out the following Monday (after the close) and my Call would expire that Friday, 6/15. By Monday RH was up to $117 with earnings on it’s way after the close.
The earnings were great and the next day, Tuesday, the stock went up to $165. This was crazy! Now, on Tuesday, with the stock fluctuating in the 160’s I was due to deliver the stock at $115. This is painful! This wasn’t the kind of pain that most options traders feel when they feel pain because on expiration day I would have a lot of money locked in. The $3400 premium, plus the stock gain of $12,680. That comes from buying the 1000 shares at an average of $102.32 and selling at $115, the Strike Price. Stock gain and premium is a total of $16,080. The pain I was feeling was the Opportunity Lost. The Opportunity Lost was the money I didn’t’t make because I sold a Call option. My profit was capped at $115. If I never sold the Call I would have been able to sell the stock in the 160’s. But because I sold the Call I was obligated to deliver the stock at $115. I say it over and over again, I’m in this game for the premiums and I don’t worry about the Opportunity Lost. This trade is a little different because the Opportunity Lost is so large. To the tune of 40 – 50 thousand dollars. O well lol.
Bought the shares on 1/23/18 and 6/4/18 for an average of $102.32
Buy 1000 Shares of RH @ $102.32
Assigned 1000 Shares of RH @ $115.00
Profit +$12,680
6/5/18 – Sell to Open 10 RH 6/15/18 $115.00 C @ $3.40 (+$3400)
6/15/18 – Expired 10 RH 6/15/18 $115.00 C
Profit +$3400
It’s pretty strange writing about a $16,080 gain and say you’re feeling pain. Believe me, I’m very happy and this money is in my mattress.
Total Weekly Gain +$16,080
Any questions, send me an email.
Steve
The Options Coach
Since the trade was good for you, will you jump back in or want to see if it will drop to 140 _ 150 range.
I will watch the stock and the market very closely. I will also be watching the candlestick chart to see if I want to get back in. It’s pretty high right now.