Happy weekend! One profitable trade in SBUX this week. And after nearly 3 years of selling puts in WBA - finally, another assignment. This week:
$35 profit in Starbucks (SBUX)
Dealing with assignment in Walgreens (WBA)
ps: I recorded a new video sharing all the dividends I received from the first 6 months of 2023, and also how this goes hand-in-hand with selling options, please check it out and subscribe to the channel!
$35 profit in SBUX
Yup, it's yet another profitable trade in SBUX! I sold a cash-secured put at the $95 strike expiring on Jul 21, and received $65 in premium. I set my closing order for about 50% of max profit, and it closed in 3 weeks, locking in $35 in realised profit (or roughly 54% of max profit)
This is my 9th profitable trade in SBUX in 2023, with a total realised profit of $888 across all trades.
Sometimes I wonder if sharing winning trades in SBUX ever gets boring to read about - but I think it does show the reality that you don't need to trade aggressively or find meme stocks to sell premium in.
Picking stocks that you're comfortable with and selling puts against them until you get assigned, is a great way to generate (a lot) of cashflow.
Dealing with assignment in WBA
If you've been following this newsletter for a while, you'd know WBA is one of those stocks I constantly trade, and there have been two or three times over the last year where it came close to being assigned, but somehow avoided it. Well, that streak had to end eventually, and I was recently assigned 100 shares of WBA at $32.50 - which means spending $3,250 to buy 100 shares. As of Friday's close, WBA is trading at $29.20. So there's an unrealised loss per share of $3.30 - or $330 since I have 100 shares. So wait, how is this options thing a good deal again?!
As in the SBUX example above, we have to remember that realised profits from previous trades also help to reduce the cost basis of shares. Here's how much I made over the last few years in WBA: 2021: $123 from 2 trades 2022: $1,013 from 9 trades 2023: $247 from 3 trades All that adds up to $1,383 of realised profits - before ever buying the stock. So even though I was assigned $3,250 worth of shares, after netting off the previous realised profits, my real cost basis is ($3,250 - $1,383)/100 = $18.67 per share. As you can see from the graph above, the last time WBA was trading below $19 was June 1998. Basically I artificially created that price by generating cashflow and profits before ever buying stock.
And of course that isn't the end of the story. Just like how I was generating cashflow before buying the stock, I'm continuing to sell options to continually lower my cost basis in my overall position, as seen in the screenshot above. You could make the point that WBA is not the best stock to invest in (and I wouldn't push back too hard on that), but it doesn't detract from the fact that the strategy of using options to lower your cost basis on the way in is better than buying at market prices.
That's it for this week - once again after taking some profits the portfolio is looking very light with only 3 trades on right now. Waiting for earnings season to kick off in earnest and hopefully provide more opportunities. If you want to take control of your finances, I've launched a budget and wealth tracker that can help you do that (check out the demo video!)
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.