I thought I was pretty much done trading this week, but NO! When you’re in positions you never know what’s gonna happen. That’s why I love this game. Like coaching basketball, it keeps me on my toes. Sometimes you think you’re done for the week and opportunities open with small movements in the market.
Let’s see what I did today, a few minutes ago.
Yesterday I started the day with the selling of a 20 contract Put on SNAP. The stock was down and I felt it was temporary. Well, thank God I was right! When the stock was down to $15.60, a little lower than it’s been. I felt it was hitting support, so I decided to sell a Put. I decided on selling the Put instead of buying the stock because of my budget. I sold 20 contracts of the $15.50 Put and brought in a premium of $600, but if I bought 2000 shares of the stock I would have had to lay out $31,200. Both positions would benefit with the stock heading north. Yes, I felt strongly that the stock was going up but not strong enough to lay out the money, with the possibility of the stock going down.
Today the stock is doing what I felt it would, it’s up. When you sell a Put it’s a Short Position. With a Short Position, when the stock goes up your position increases in value. You must understand Short Positions! I sold the Put with a premium of 30¢ which is $600 on the 20 contracts. Today the premium went down to 5¢. On the 20 contracts the premium is now $100. Yesterday I sold to open the position to bring in $600, and today I bought the position back with a “Buy to Close” which cost me $100, for a $500 profit. And the position is closed! Selling options is a great, low risk way to bring in some nice cash.
9/16/19 – Sell to Open 20 SNAP 9/20/19 $15.50 P @ 30¢ (+$600)
9/17/19 – Buy to Close 20 SNAP 9/20/19 $15.50 P @ 5¢ (-$100)
Profit +$500
Why did I make this move? I could have held for 4 more days and kept the entire $600. Well, #1, most readers know I like to lock in profit, but today I had another reason. I saw a great opportunity for another position and I wanted to free up some margin money.
The other position was a Square (SQ) Buy-Write. I watch SQ every day. It’s on my watch list. It’s been heading south for the last few weeks and I felt it was hitting support. I think it’s going up from here. The stock was at $59.50 and I looked at the premium for the $60 Strike Price expiring this Friday, 4 days away. The premium was 88¢. An 88¢ premium definitely fits into my “1 Week/1%” strategy. I decided to place an order to buy 1000 shares of SQ at $59.50, along with placing an order to sell 10 contracts of the $60 Call for a 90¢ premium. Within a few minutes I was filled on both.
Square – Buy-Write
Buy 1000 Shares SQ @ $59.50
Sell to Open 10 SQ 9/20/19 $60.00 C @ 90¢ (+$900)
If I get assigned, which I hope I do. I’ll make $500 on the stock sale and keep the $900 premium. That’s a $1400 gain in 4 days! This is a Covered Call on a great stock. This trade gets a Risk Factor 1.
Because of my margin I would not have been able to get filled with this position if I still held the SNAP position. The bottom line is, I traded the SNAP position locking in $500, which had the potential to make another $100, for the SQ position, which has the potential to make me $1400.
Now, this is a no-brainer! However, you must be near your computer to see the opportunity and pull the trigger.
I have a bunch of positions working. Let’s see how the week will end up. I think it will be a great week. But let’s not forget the Fed speaks tomorrow!
Steve
The Options Coach