It was expiration Friday for the April monthly options this week so a ton of positions came off, including the Microsoft position below.
On top of that JNJ reported earnings which led to some tweaks in my position - read on for more.
This week:
$154 profit in Microsoft (MSFT)
Re-establishing a covered strangle in Johnson & Johnson (JNJ)
$154 profit in MSFT
I sold a $220/225 put ratio spread in MSFT which expired on Friday (Apr 21). The initial credit was $154, although I was hoping that MSFT would drop slightly so that the embedded put spread would add more ROI to the trade. Unfortunately MSFT rocketed up to something like $280 never looked back, so that didn't happen. Because MSFT jumped so much, it didn't make sense to give up any credit by closing it early, so this is one of the rare times that the trade was left all the way to expiry. Since the entire spread expired worthless, I kept 100% of the $154 credit as profit.
The screenshot above is from my private community hosted on Circle - I share trade updates from my portfolio in real time. It costs $49 a month so that's 3x ROI on the subscription in this one trade alone.
Re-establishing a covered strangle in JNJ
JNJ is my new long-running saga position but I love it because it shows the reality of option selling - not every trade will be instantly profitable and I'm here to show you the truth! In my last update, I shared that I got assigned 100 shares of JNJ at $160 per share. I then sold a $145/160 covered strangle expiring on Apr 14 against that position for $113, bringing total premium collected on the trade to $346. It's important to understand that once a covered call goes past the strike, there's no additional profit to be gained, except for option premium. So instead of sitting on that $160 call, I rolled it to May 19 for $248, basically extending the duration of the covered call. I left the $145 put to expire worthless and kept all the premium from that.
This past Tuesday, JNJ reported earnings and the stock was initially down about 2%. This was a great opportunity to re-establish the covered strangle so I sold a $155 put in the same May 19 expiration cycle for another $98. That brings the total premium on this trade to $692. Now once again there are 3 general outcomes: 1 - JNJ stays where it is or higher (above $160). Then the stock gets called away and I keep $692 of profit. 2 - JNJ drops between $155 and $160 and stays there. I keep the $692 profit but probably have to sell another covered call or strangle next month to work my way out of the position 3 - JNJ drops below $155 and I'll have to roll that put and deal with the reality of possibly being assigned another 100 shares. We'll see how this plays out over the next 4 weeks. You can read about how I dealt with the original JNJ assignment and covered strangle at the link below.
That's it for this week - lots of earnings coming up next week in stocks you see all the time in this portfolio. I for one will be hoping for some negative reaction to earnings so that I can put some new positions on.
This article is for educational purposes only. This is my own portfolio which is being managed according to my goals and risk tolerance. Your situation is likely different and you should do your own due diligence before investing in stocks or options.