If you are only invested in Long positions at this time you are feeling a lot of pain. Hang in there and hopefully thinks will change soon. The problem is, to get into most Short position you need to have a margin account. I’m putting a lot of time on the phone talking to friends. I’m also receiving calls from people who are in the learning process to be options traders and investors. Everyone is trying to figure out what is going on, and what to do. I’m finding out that just about everyone I talk to does not have a margin account, and are only in Long positions. Let me be very clear, if you are on margin and only hold Long positions, you are experiencing a very bad situation. If you are on margin I would get out of Long positions or get off margin. I got out of most of my Long position over a week ago. I still have a few but at this point most of my positions are Short positions. At this point, if you think we still have a ways to go down, I would get off margin. Or get out of that Long position. I don’t feel we are at a bottom yet but hopefully we are getting close. My Long positions I’m still holding I’m gonna let ride, I don’t have much.
Let’s take a look at what a Short position is and the positions I’m holding.
Selling Short
Short selling occurs when an investor borrows a security and sells it on the open market, planning to buy it back later for less money. Short sellers bet on, and profit from, a drop in a security’s price. Short selling has a high risk/reward ratio: It can offer big profits, but losses can mount quickly and infinitely.
Short selling a stock works opposite than what we are accustom to. Normally we buy low and sell high. When Short selling you sell first when the stock is high and buy the stock back at a lower price. The only way you can do this is when your broker borrows the stock for you to sell.
I do not do this much at all. In fact, close to never. I shorted one position, at this time, with this method. I short sold 100 shares of Delta Airlines (DAL). I really don’t like Short selling so I only did 100 shares. I Short sold DAL when it was at $36.32 and as I write the stock is at $25.75. Here’s my position:
3/12/20 – Short 100 Shares DAL @ $36.32
This position is only 100 shares but I’m up over $1000.
Selling Calls
Another way to Short is by sell Call options. I have a lot of these positions now. And most are Naked. When selling Calls you bring is a premium as income. If the stock stays below your Strike Price you don’t have to deliver the underlying stock and you keep the premium. This is my favorite way to Short because if you are Naked, and the stock goes above your Strike, you can get out of trouble with a Roll-Out.
I have many Short Call position right now. They are listed below. A few are Covered but most are Naked. All these positions expire this Friday. Watch for my report Friday night of Saturday.
Here are my Short Call positions. The 1st parentheses is the price of the stock when I made the trade and the 2nd is the premium I received.
3/13/20 – ($107.80) Sell to Open 10 WMT 3/20/20 $120.00 C @ .27 (+$270)
3/13/20 – ($38.50) Sell to Open 10 UAL 3/20/20 $44.00 C @ $2.50 (+$2500)
3/13/20 – ($18.60) Sell to Open 10 WW 3/20/20 $20.00 C @ $1.00 (+$1000)
3/13/20 – ($17.24) Sell to Open 10 CCL 3/20/20 $21.00 C @ $1.00 (+$1000)
3/13/20 – ($13.95) Sell to Open 10 OXY 3/20/20 $16.00 C @ .65 (+$650)
3/16/20 – ($32.60) Sell to Open 5 UAL 3/20/20 $35.00 C @ $3.00 (+$1500)
3/16/20 – ($16.10) Sell to Open 10 CCL 3/20/20 $20.00 C @ .50 (+$500)
3/17/20 – ($135.80) Sell to Open 10 MSFT 3/20/20 $142.00 C @ $4.20 (+$4200)
3/17/20 – ($144.50) Sell to Open 1 FB 3/20/20 $143.00 C @ $8.00 (+$800)
3/17/20 – ($317.50) Sell to Open 1 NFLX 3/20/20 $325.00 C @ $10.00 (+$1000)
3/17/20 – ($211.00) Sell to Open 1 NVDA 3/20/20 $225.00 C @ $5.00 ($+500)
With all these positions I worried about 2. As I write my 10 contract AAPL and WMT positions are In-the-Money right now. If they don’t drop down below my Strike Price for Friday I’ll be doing Roll-Outs. My NFLX position is also In-the-Money but that is Covered. AAPL and WMT are Naked.
Buying Puts
When you buy a Put you are holding a Long position, however, if the stock goes down the position will increase in value. I bought a few Puts, all expiring on 9/18/20. Below are the Puts I bought.
The 1st parentheses is the price of the stock when I bought the Put. The 2nd is the amount I paid for the Put.
3/12/20 – ($15.45) Buy to Open 2 TRIP 9/18/20 $15.00P @ $3.80 ($760)
3/12/20 – ($42.10) Buy to Open 2 UAL 9/18/20 $40.00 P @ $11.10 ($2220)
3/16/20 – ($248.00) Buy to Open 4 AAPL 9/18/20 $250.00 P @ $39.00 ($15,600)
As you can see by my positions I feel the market has a little more drop in it. I think as time goes by my Short positions will decline. As I write the market is down about 1300 points but my account is up $7000 because of my Short positions.
I think some stocks are nearing a bottom so after this week I’ll be watching very closely and picking my positions very carefully.
Hang is there. Keep studying. Stay safe.
Any question about my moves send me an email.
Successful Trading,
Steve
The Options Coach