This past Friday I sold 10 Twitter (TWTR) Calls. With the market down today the premium dropped so I did a Buy to Close for a $600 profit.
Late in the day on Friday I sold a 10 contract TWTR 8/9/19 $43 Call for a premium of 90¢ for a total premium of $900. Today the market is down to start the week on China devaluing it’s currency. This is all a part of the trade war. With the market down, and TWTR also down, the 90¢ premium was down to 30¢. Most Main Street beats Wall Street readers know I like to take advantage of this situation. To understand this movement in the premium and how a Call seller makes money here you must understand Short Positions. I sold this Call and brought in 90¢ ($900) and bought the Call back for 30¢ (-$300) which gave me a $600 profit. Here are the Sell to Open and the Buy to Close orders to complete the trade,
8/2/19 – Sell to Open 10 TWTR 8/9/19 $43.00 C @ 90¢ (+$900)
8/5/19 – Buy to Close 10 TWTR 8/9/19 $43.00 C @ ¢30 (-$300)
Profit +$600
When I’m in a position for a short time and I see an opportunity to get out with a nice profit, usually 50% or more of what I sign up for, I like to jump out and lock in profit. I will normally do this when there is plenty of time to expiration. I hope for a bounce back and an opportunity to sell another Call with the same Expiration Date. I hope I get another Call sold this week.
Today is a very tough day for the market and it’s times like this when you need a strong stomach. Being an options trader is not always a smooth road. Today we ran into rough terrain with many potholes.
Steve
The Options Coach