+$833 from BBY & KMB on expiration Friday
1) BBY - making $657 but leaving $400 on the table & why that's ok
2) KMB - closed for a profit
3) JNJ trade update
Best Buy (BBY) - could I have made more?
Here’s BBY’s stock price for the last 6 months. On 5 May, when it was trading at $92.21 (well off its March highs), I thought it would be a good time to initiate a trade.
I sold a $82.50 put expiring on 17 June - which means I promised to buy 100 shares at $82.50 per share on 17 June. At the time I received $204 in premium to take on this trade.
Obviously from the chart 17 June arrived and BBY was below $82.50, but I didn’t quite want to commit to spending $8,250 to buy 100 shares just yet.
So I used every trick in the book to roll the position continuously - first to July and then to a position expiring 19 August at the $77.50 strike (already saving myself $500 if I ever have to make good on my promise).
Along the way I collected a total premium of $1,057.
However last week I gave up $400 of this premium to buy the option back and close out the trade for $657, or 62% of max profit.
Why did I do that? BBY closed at $79.53 on Friday. If I’d left it I could have kept all $1,057 for myself and make 100%!
And believe me I was tempted! However I've been in this situation too many times where I’m sitting on a position and it costs me $400 to close, but the market takes a turn and 2 days later it costs $800 to close, or even worse, turn into a losing position.
So instead I took the opportunity to close a trade that I’ve been carrying for the last 3 months and contribute $657 to this month’s income streams from options. Not bad for a trade that was losing money!
Kimberly Clark (KMB) closed for a profit
This is part of a trio of trades with ABBV & PG about a month ago, click the link below for the full context of the considerations & reasons behind entering these trades.
PG was the first to be closed for a profit, and last week I said I’d be adjusting my profit target for KMB to 80% of max profit.
As you can see from the screenshot above, I sold the original put for $220 and bought it back this week for $44.
That’s $176 profit on the trade (or 80% of max profit).
That still leaves ABBV as the last trade standing of the trio.
I sold the $135 put expiring 16 September for $205, it’s currently trading at $124. Not quite at my profit target of 50% - 75% yet.
There’s still 26 days to go before 16 September, I will leave this trade on and look for an opportunity to close it for a profit.
JNJ trade update
This is a new trade that was just put on last week.
At the top you see Johnson & Johnson’s (JNJ) closing price on Friday - $169.31
Circle 1 is the trade - I sold a put at the $160 strike expiring 16 September. This means if JNJ is trading below $160 on 16 September, I’ll have to make good on my promise to buy it.
Circle 2 is the how much the option is currently worth, $0.80. Or $80, because 1 option contract is the equivalent of 100 shares.
Circle 3 is how much premium I received when I put the trade on, $1.45 (or $145 for 100 shares).
First thing to note is this trade is already profitable in a week. I could pay $80 right now to close it, and still make $65 on the trade (or about 45% of max profit).
In fact that’s what I did last week in Nike - the trade gave me 55% of max profit in a week, I closed it and moved on.
However, as detailed in last week’s trade entry, I’m actively trying to get assigned on JNJ. Which means I want it to drop below the $160 strike price and I want to buy 100 shares at $160.
I’ve already collected over $1,000 in premium in JNJ so far in 2022. So even if I had to buy it at $160, after taking into account all the premium, I would be purchasing this stock at a sizable discount and it would be a welcome addition to my long term dividend portfolio.
That’s it for this week, I’m still waiting for some volatility to come back in the market before putting on new trades. 2 active trades in the portfolio is a new low for the year!
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 dilligence before investing in stocks or options.