I ended last week’s newsletter hoping for some volatility to creep back into the markets, but we got the opposite instead.
It’s not all bad because the rally this week gave me the chance to finally close ABBV for a profit, and all positions are currently profitable as well.
Let’s walk though the positions.
1) ABBV finally closed for a profit
2) Trade update: SBUX & WBA
3) Trade update: JNJ
Abbvie finally closed for a profit
After weeks of floundering between unrealised gains and losses, ABBV has finally been closed for a profit.
The trade was put on for a $205 credit and I closed it for $140 - that’s $65 profit or 32% of max profit.
Just to recap, the origin of this trade was seeing 3 opportunities in Abbvie, Kimberly Clark and Proctor & Gamble, and knowing I’m not smart enough to pick a winner to go all in on, and so I entered a small position (1 contract) in each of them instead.
This worked out pretty well with 1 big winner in KMB (80% of max profit), one average winner in PG (56% of max profit) and one small winner in ABBV (32% of max profit).
We walk away with 56% of max profit on the overall trades, or $352.
The important thing is all trades were profitable, nothing was assigned and all my capital is freed up and ready to be redeployed.
I’m inserting a link to the first trade where these 3 positions were put on. If you click on it and read the blog in sequential order, you’ll see how the trade evolved and I took profits along the way until ABBV was the last trade standing.
Trade updates: Starbucks & Walgreens
Both these trades were put on last week and already showing nearly 50% of max profit thanks to this week’s rally and drop in volatility.
Circle 1 is the trade - using WBA as an example I sold a put at the $35 strike expiring 7 October.
In plain English - I’m making a commitment to purchase 100 shares of WBA at $35 on 7 October.
I will only have to make good on this commitment if WBA is trading below $35 (otherwise it makes sense for the person holding WBA shares to sell at a price higher than $35 in the open market).
Circle 2 is how much the put option is worth now ($61) and Circle 3 is how much I received in premium ($112).
I was tempted to close SBUX in particular, but the portfolio is looking so light with just SBUX and WBA as the only active positions that I decided to leave it for one more week. For WBA, I will be leaving it to either get assigned, or closed for $0.20.
I already have 200 shares of WBA that were assigned at $50 a couple of years ago, and I have no way of selling covered calls above my cost basis unless I lower my cost basis further.
And that means… potentially picking up more shares.
This isn’t something I’m actively doing - but since the trade is on and there’s no real impetus to close positions, I’m happy to leave it be. If you’re following along and don’t have WBA shares, obviously the approach would be different.
You can read last week’s post where I set up the SBUX & WBA trades below.
Trade update: Johnson & Johnson
So close!
In last week’s newsletter I said I had an order in to close the trade at $20, on Friday it closed at $25!
That’s actually not bad considering last week it was trading at $135 - that’s a $110 unrealised profit swing in 4 days.
The stars aligned and JNJ’s stock price moved up, overall volatility dropped and time decay is really kicking in - which is why this position moved so much this week.
Even though at this point it’s looking like a “sure” winner, I’m still leaving that order in to close the position at $20.
There’s no point taking unnecessary risks with any trade.
I talked about how my approach to this JNJ position is very different from my usual trades because I’ve been trying to get assigned the stock all year.
I’ve linked to the original post with all the details if you’re interested in finding out more.
2022 has been a pretty volatile year - so this period of relative calm is somewhat of a novelty.
This is why I don’t trade with a particular direction in mind - I trade what the market gives me.
I feel that taking my own opinions out of the equation makes me a better trader and investor overall.
As always, you can reply this email with any questions or clarifications, or just DM me on Instagram.
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.