On Friday I sold 8 AMD 4/12/19 $29.50 Calls on 800 shares of Advanced Micro Devices (AMD) I own. Today I did a “Buy to Close” to exit that position.
I sold this Call for 61¢ and I did the “Buy to Close” for 29¢. If you are a new trader you must understand Short Positions to understand a “Buy to Close.” I sold the Call for 61¢ with a “Sell to Open” and I closed the position with a “Buy to Close” for 29¢. That gave me a 32¢ profit. On the 8 contracts, 800 shares, it’s a profit of $256.
Sell to Open 8 AMD 4/12/19 $29.50 C @ 61¢ (+$488)
Buy to Close 8 AMD 4/12/19 $29.50 C @ 29¢ (-$232)
Profit +$256
I have a rule. If I sell an option and I can get out of the position in a day, or the same day, with over 50% of the premium, I close the position and move on. This position I got into on Friday and got out today, Monday, the next trading day. I still have 5 days in the week. A lot can happen in the week. I might get another Call sold, the stock might move above my Strike Price and I’ll get that gain in the stock, maybe I do nothing. Either way, I keep the profit I made with the closing of the position. I’m a believer in taking profit. In all my years trading I’ve seen a lot happen; and you never know what is gonna happen. I like to take profit and see if another opportunity arises to make more profit. If not, I settle with what I got.
Today I bought another 200 shares of AMD. I now own 1000 shares. With the closeing of the above position my next Call will probably be a 10 contract Call. The 1st 800 shares I bought for $29.50. The next 200 I bought for $28.90. My average cost is $29.38. Now if I sell a $29.50 Call and get assigned I’ll make 12¢ on the 1000 shares ($120) in addition to the premium.
Let’s keep an eye on AMD. It’s not moving great today but I think it will soon. Let’s hope! lol
Steve
The Options Coach