Yesterday I sold 5 Calls against 500 shares of Cree I own. I sold 5 Cree 3/29/19 $60 Calls for a premium of 80¢. Selling this option brought me in a premium of $400. Today with the market down, so is Cree. I placed an order to “Buy to Close” this option for 20¢ ($100). I was just filled on that order. I sold the option for $400 and I bought it back for $100 giving me a $300 profit in 1 day. This position is now closed. I no longer have the obligation to deliver the 500 shares of Cree at $60, if it hits that by next Friday. If this is just a 1 day drop in the market I think Cree will hit $60 within the week. This is why I took the profit and closed the contract to deliver the stock. If I held on to the option for the next week I would have only received another $100. I think this was a good move. With a full week until expiration I’d rather have the stock with no strings attached. Especially since I was able to keep 75% of the premium. Below are the 2 trades to open and close this position.
Sell to Open 5 CREE 3/29/19 $60 C @ 80¢ (+$400)
Buy to Close 5 CREE 3/29/19 $60 C @ 20¢ (-$100)
Profit +$300
Some of you might know, if I get into a position and I’m able to get out keeping half my premium and there is still a lot of time left until expiration, I’ll get out. The market moves so crazy sometimes I like to take some profit and stick it in my mattress.
Steve
The Options Coach