Happy Sunday!
This week:
$99 profit in Caterpillar (CAT)
$327 profit in Texas Instruments (TXN)
$99 profit in CAT
A couple of weeks ago I shared my opening trade in CAT in the newsletter - I sold the Jan 19 $220 cash-secured put for $187 in premium
Just 5 trading days later, on Nov 29, I paid $88 to close the position, locking in a profit of $99, or about 53% of max profit.
Interestingly this is my first trade in CAT for the whole of 2023.
I think I tend to be cautious with the higher-priced stocks, because being assigned means setting aside $22,000 to buy 100 shares - so I really try to wait for the best opportunity before putting my money at risk.
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$327 profit in TXN
Of course, not every trade gets taken off for a profit in 5 days like the CAT position above, case in point, TXN.
Way back in August, I put this trade on and sold the $155 cash-secured put for $165.
Unfortunately the trade went in the money, and while I was ok with buying 100 shares for $15,500, I didn't want to do that unless I was absolutely forced to.
So I performed what's called a roll, not once but 3 times - as detailed in this previous update.
On top of that, I also converted the put to a jade lizard, which allowed me to take in more premium which of course allows for greater flexibility in dealing with the trade.
In total, I took in $627 in premium and closed it for $300, locking in $327 in realised profits.
In my weekend update to my private community last week, I mentioned that I was tempted to adjust my profit targets. And in fact if I had, I would have made more money on the trade.
However, after nearly 12 years of trading options, I've learnt the hard way that sometimes you just need to be happy with making money - even if it's not fully maximising profit on every trade.
In this case, the trade went bad from the beginning and was tying up $15,500 of my capital for a few months, so I was happy to get out of it with a healthy profit in the end.
This makes it 5 wins out of 5 in TXN this year, with a realised profit of $550 across these trades.
Closing thoughts & useful links
The market rally shows no signs of stopping, and December has historically been a good time for stocks.
The current conditions do not meet my criteria for initiating new trades, and so it's been pretty quiet (though I did squeeze in one trade in SBUX this week).
It's difficult to be patient and sit on the sidelines, but ultimately being a good trader is as much about knowing when not to take action, as much as when to take action.
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This newsletter 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.