As most of you know it was a tough week in my personal life but it was a great week in the stock market.
With the markets moving well and hitting new highs all the time I’ve been buying some options. I really don’t push buying options because when buying you really have to know what you’re doing. And this is a learning website! I do not recommend any Grasshopper getting into buying options. You must understand, 80% of Long options expire worthless. It’s the people buying options that give options trading a bad rap. You can buy a short term option very cheap and can make a huge Rate of Return on your investment. This is why it’s attractive to new traders (Grasshoppers). I frown upon new traders buying options but I do it as a stock alternative. I guess you heard the line, “do what I say, not as I do.” It applies with buying options!
When I buy options I go out at least 6 months with my Expiration Date. And that’s not even enough! Time Decay starts working against the value of an option with about 6 months to go. If I buy an option today I’m going out to at least June, 2020.
The reason I’m writing this is because this week I sold a Long option I owned with Microsoft (MSFT). The option’s Expiration Date in January 17, 2020. Some might say, “why are you selling that position, it’s a hot stock.” Well, the option I sold had only 2 months until expiration. If the stock pulled back a little, and with Time Decay working against you, you could end up in the 80% category of worthless options. Instead, because of my knowledge I walked away with a Rate of Return of 8.8%. It was only 400 bucks but I didn’t lose money. This $400 will make my mattress just a little bigger!
10/28/19 – Buy to Open 10 MSFT 1/17/20 $145.00 C @ $4.50 ($4500)
11/11/19 – Sell to Close 10 MSFT 1/17/19 $145.00 C @ $4.90 ($4900)
Profit +$400
My next trade was a mistake but it ended up making a small amount, but with a great Rate of Return. On a mistake I invested $500 and profited with $150. I know it’s small but it was a few hour and I jumped out as soon as I realized my mistake. The mistake was I hit the wrong button and I bought an option instead of selling one. If you didn’t already, you can read about the mistake in the post I made. A Lot toReport – Please Read. The return was 30%.
11/11/19 – Buy to Open 10 AMD 11/15/19 $35.50 C @ 50¢ ($500)
11/11/19 – Sell to Close 10 AMD 11/15/19 $35.50 C @ 65¢ ($650)
Profit +$150
I sold a Call on my DISH shares, and again I wasn’t assigned but I keep the premium.
11/11/19 – Sell to Open 10 DISH 11/15/19 $36.50 C @ 40¢ (+$400)
11/15/19 – Expired 10 DISH 11/15/19 $36.50 C
Profit +$400
With Square (SQ), I bought the shares on 10/1/19 and have been selling Calls without getting assigned. This week I finally got assigned. I made $1750 on the sale of the stock and keep the $500 premium. I will be back in SQ shares tomorrow. The stock is hot!
10/1/19 – Buy 1000 Shares SQ @ $62.75
11/15/19 – Assigned 1000 Shares SQ @ $64.50
Profit $1750
11/11/19 – Sell to Open 10 SQ 11/15/19 $64.50 C @ 50¢ (+$500)
11/15/19 – Expired 10 SQ 11/15/19 $64.50 C
Profit +$500
In addition to the Covered Call with SQ above, I also sold a Naked Call. I went up on the Strike Price to a number I did not think SQ would hit, $66. The stock didn’t hit the $66 Strike and the position expired. Great trade!
11/11/19 – Sell to Open 10 SQ 11/15/19 $66.00 C @ 50¢ (+$500)
11/15/19 – Expired 10 SQ 11/15/19 $66.00 C
Profit +$500
Look at some of the amounts of the profits per trade. All pretty low except for the stock sale of SQ, $1750. It was only 6 trades, but really 5 because one was a Covered Call on previously owned stock. Check out the weekly gain.
Total Weekly Gain +$3700
The last 2 week my gains were just under 10 grand. Let’s watch and see what I do next week. I already got it started. On Friday I sold a 10 contract Call on SQ for an $800 premium. Let’s see if I can beat this week!
The thorn in my side is my Advanced Micro Devices (AMD) position. My Naked Call went against me. I did a Roll Out until 12/13. Take a look when I got in the trade, how it went bad, and the Roll Out. I am bent on using this position as a learning tool for you. When trading options it’s not always a smooth road. Sometimes you hit road hazards. You must learn how to make adjustments trades, negotiate your way back to the smooth road to make them winners. My adjustment trade was a Roll Out. I still think AMD will pull back.
Successful trading,
Steve
The Options Coach