Happy Sunday!
The market feels like it's sorting itself out a little bit this week so no trades got closed for a profit (at least in this account), so I'm going to provide an update on 2 positions that are in the money, and how they're being treated differently because of the type of trade that was put on to begin with.
Updates this week:
Trade update in Starbucks (SBUX)
Trade update in Realty Income (O)
SBUX trade update
I shared the details of this trade in SBUX in last Sunday's newsletter, and some interesting developments have happened this week. I sold the $95/97.50 put ratio spread expiring Sep 15 for $43, and this week the $97.50 put went ITM, which is actually a good thing for a put ratio spread. With SBUX closing on Friday at $95.48, the combined spread is now worth $16 ie, the trade is at about 63% of max profit.
But with put ratio spreads, I'm less concerned with the initial profit, and more keen to make extra money by way of the embedded put spread (if this makes absolutely no sense to you, feel free to skip to the next section) If SBUX continues to hover around this range, especially with 20 days to go, there's a good chance I'll be able to squeeze extra profit out of this trade, which would be great. As always I already have my closing order entered, it's just a matter of whether it gets filled. Stay tuned!
O trade update
This trade was put on a while ago during a live training session as part of my options course. I sold the $57.50 put in O expiring Sep 15 for $70. As you can see O closed at $56 on Friday, which means it's $1.50 ITM and so the put is now trading for $177 - meaning that if I were to close the position now, I would incur a $107 loss.
Obviously that is not what I'm going to do, but there are other options on the table right now.
First, if O does rally back sometime next week, I could choose to close it for less than my usual profit target. Not ideal, but making any amount of money is always a good thing.
Second, if O does continue to remain ITM and hits my other criteria to be rolled, then I will roll it out.
Third, there's always the option of taking the assignment of 100 shares, which I wouldn't choose to do in this account (it's about managing options after all), but if it does happen, I would be happy to sell covered calls or strangles against it to get out, which was what happened in JNJ earlier in the year.
Closing words & useful links
As always, there's a lot of noise in the market - my preference is to ignore it unless it's going to fundamentally affect the companies I choose to invest in.
Volatility has remained relatively high (relatively being the operative word) over the last couple of weeks, which has provided pretty good conditions for putting on new trades. Now we'll just have to be patient and wait for the right opportunities to close them for profits.
Free mini course: Kickstart your personal finances in 5 weeks
Latest Youtube video: all my dividend income from Jan - Jun 2023
Improve your financial life with my budget and wealth tracker that helps to allocate your budget, calculate savings rate, track your sinking funds, net worth and progresses towards FIRE with minimal input from you - most of it is automated.
Sign up for real time updates (not recommendations) within my portfolio with the Bread Crumb subscription
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.