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  • Writer's picturethemoneyloaf

$182 profits in TXN & ITW

Happy September! August was one heck of a month. Volatility was (relatively) high all month, and then just fell off a cliff in the last week. Higher volatility was great for putting on more trades, and I wanted to share 2 trades that turned a profit over the course of the month. Both these trades took roughly a full month to close, and shows the impact of some volatility in the market as well as the benefits of sticking to the strategy.

  1. $52 profit in Texas Instruments (TXN)

  2. $130 profit in Illinois Tool Works (ITW)

ps: so many trades got closed over the last couple days of August that I haven't had time to tally them all. I'll share the full month's profits in next week's newsletter. (spoilers: it's the best month ever since I started this public portfolio 12 months ago)



 

$52 profit in TXN


TXN reported earnings on 26 July and dropped more than 5% after earnings. I decided to sell a cash-secured put at the $160 strike expiring Sep 15 for $102 in premium.

txn put option trade details

Note how I referenced the “low volatility environment" right at the end - this turned out to be the right choice! As August came, the VIX (a measure of volatility) would go from the year's low of 13 up to 18. Still low by historical standards - or even 2022's standards - but high for 2023. As you can see from the chart below, TXN never jumped back to the $175-ish mark when I first opened the trade, but it also never came near the $160 put strike At the same time, the trade wasn't closed for a profit until 29 August for $52 profit (or 51% of max profit), with 15 days to go before expiration.

selling txn put option chart

This is the impact of higher volatility pushing up option premiums - so even though the trade was never in trouble at any point, it became a patient waiting game for enough time to pass to be able to close the trade for a profit. This was trade #36 shared with my private community via the Bread Crumb subscription. At $52 profit, this one trade would cover the subscription cost for the entire month, and any other trades, such as the next one in ITW, would be pure profit. I know some people who signed up for just one month in July, and perhaps disappointed by having “only” 2 trades that month, cancelled their subscription (and thus missed out on 9 new trades and profits in August). It's helpful to keep in mind that returns are not going to be linear. Some months will be less profitable, other months much more profitable. I really feel sad for people who have such a short-term mentality and approach to creating wealth. If you're going to be on this journey, it's making money over years and decades - not weeks and months.




 

$130 profit in ITW


Similar to TXN, ITW presented an opportunity to enter a trade after earnings on 1 August. I sold the $240 put expiring Sep 15 for $230 in premium.

selling itw put option chart

This time the trade did go in the money, spending quite a bit of time below the $240 put. At various times during our weekly livestream, this put that I sold for $230 was trading close to $700 - a nearly 3x loss on the position! However, even during those periods, the position didn't meet the criteria for rolling or defending the trade, so again the answer was to be patient and let it sit.

selling options itw profits

Eventually on Aug 30, a full month after being put on, my order to buy back the position for $100 was hit, locking in $130 in profit or 57% of max profit. The key to both trades was being patient, following the strategy and not panicking. Even if both trades did end up being in the money or even got assigned early, there's always the next step in the strategy to follow to work my way out of it. You can read about one such instance with JNJ earlier in the year, which resulted in $914 profit in that one trade.




 

Closing thoughts & useful links


One thing I've repeated often is that I don't have a particular outlook for the market, I trade what the market gives me. Months like August are a gift, and I'm more than happy with what it gave the portfolio. Looking forward to sharing with you August's profits next week.



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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.

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