Happy weekend!
Updates this week:
$47 profit in Colgate (CL)
New trade in Johnson & Johnson (JNJ)
Before starting on the options stuff I wanted to tell you about a free mini course I just launched called “Kickstart your personal finance journey in 5 weeks”.
You get a series of 5 emails from me with some guidance on topics like budgeting, saving for an emergency fund and building sinking funds.
Each email contains small, actionable steps that you can take at your own time, I think you'll find it useful.
$47 profit in CL
On Friday July 28, CL reported earnings and the market didn't quite like what they had to say, so the stock took a dip. I took the opportunity to sell a put at the $72.50 strike expiring on Sep 15 for $85 On Monday morning on July 31, 9 minutes after the market opened, my trade got closed at $38, which means I locked in a realised profit of $47, or about 55% of max profit. Not bad for one trading day!
When people take my options course, a common question is why take profits at 50%? Why not more? There are many reasons, but one of them is capital efficiency. In this situation, the trade locked in 55% in one trading day (from Friday to Monday). This past Friday (August 11), the same put option is trading at $20, which is $18 lower than when I closed the trade on July 31. Meaning if I held on to this trade for another 2 weeks, I could have squeezed another $18 of of it. I don't know about you, but that extra $18 isn't worth it to me. A lot can happen in 2 weeks, I prefer to take the win and move on and deploy it into a new trade. Ultimately what we want is consistent cashflow each month, and that's what managing positions at a percentage of max profit does for you. As always, if you're familiar with options you can check out my Bread Crumb subscription where I share real time updates (not recommendations) from my own portfolio.
New trade in JNJ
JNJ presented a great opportunity just over a week ago, and I took the opportunity to sell a $160 put expiring on Sep 15 for $142 in premium.
One quirk about this trade was that even though it hit my open interest requirement, the bid-ask spread was very high (think of it as changing money into a foreign currency, you want the spread to be as tight as possible so that you get a good price). The good thing is I was able to provide guidance for people in my course, and as you can see from the screenshot, they actually ended up getting it filled at a higher price than I did, which is great because they could either make more money or take it off earlier for 50% profit.
This put is trading at $65 or just over 50% of max profit, and I will be looking to take off this trade and lock in some gains soon. JNJ has been a great performer for the portfolio in 2023, including one epic trade with $914 in realised profit - which is actually one of my favourite trades so far not because it made that much money, but because a lot of things went wrong in that trade, and I still made that amount of money. Click on the link below to read more about the saga.
Closing words & useful links
We actually had quite a big volatility move early in the week (well, big for 2023), which led to 2 different trades being put on, which I'm not sharing yet because they are still viable trades and obviously people in the Bread Crumb subscription pay to see these updates. Fingers crossed for even more volatility in the weeks (months?) ahead, which will provide more opportunities to make money.
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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.