$2,116 from selling options in July 2022
We finally got some movement in the market with companies reporting earnings - so there are a couple of new trades to discuss this week.
Also since it’s the end of the month, I wanted to do a wrap up of all the trades that were closed in July, and the specific trades I made.
All trades & profits in July
First up, here are the 10 trades that I closed in July, listed alphabetically.
I received a total of $2,904 in options premium and used $788 of that to close positions. That’s a net overall profit of $2,116 or 73%.
I try to lock in anything between 50% - 75% of potential profit on average, so this month is on the high side. No complaints!
Some notes on how to read the table (you might want to be on desktop if you don’t want to squint):
csp = cash-secured put, which has been the strategy I’ve been describing all along to make a commitment to buy 100 shares of a stock at a certain price.
If you missed it, you can read a detailed explanation in my options strategy primer.
If there’s an (R) at the end of the trade, it indicates that I rolled the trade at least once - which means the stock price was lower than the strike price, and the trade wasn’t profitable and I bought myself time for the stock price to recover.
I detailed one of the Starbucks examples two weeks ago.
The rolled trades managed to lock in between 34% and 66% of max profit, which isn’t too bad for getting the trade wrong. Not something you can do easily if you just buy and sell stock.
New trades in ABBV, KMB & PG
It was a big week for earnings, and the market was not impressed by the earnings of Abbvie (ABBV), Kimberly Clark (KMB) and Proctor & Gamble (PG).
Check out that drop in PG! It’s not often you see solid blue chip stocks like PG drop 6% in one day, so this was definitely an opportunity I wanted to grab.
I entered 3 trades:
ABBV - 1x put expiring 16 Sep, $135 strike. Premium = $200.
KMB - 1x put expiring 16 Sep, $125 strike. Premium = $210.
PG - 1x put expiring 16 Sep, $135 strike. Premium = $200.
Note that all the trades are more or less similar, with ABBV and PG being basically the exact same trade at the $135 strike and receiving $200 for each contract.
By trading a smaller number of contracts across multiple stocks, I’m giving myself some room to be wrong an spreading out my risk.
I could have just done 2 contracts in either ABBV or PG, but I would be relying solely on the price movement of one stock to determine if this trade will be profitable come September.
I’ll add these 3 trades to the list of trades that I’ll be tracking weekly in this newsletter.
Speaking of tracking trades…
Trade update - Walgreens
At the top you have the name of the stock, WBA, as well as its closing price on Friday, $39.62.
Circle 1 contains all the option details. Reading from left to right, it shows I have 2 contracts expiring on August 19, which is in 20 days, at the $37.50 put strike.
Circle 2 is how much one option is currently worth, 35c. Or actually $35 - because remember each option contract controls 100 shares, so the number needs to be multiplied by 100.
Circle 3 is the trade price - $1.22 or $122. (Click here for a recap of the trade details)
For one contract, I already collected $122 (the trade price), and the option is currently worth $35.
This means I could choose to pay $35 to close the trade now, which will leave me with $87 in profit ($122 collected upfront minus $35 paid to close the position).
That’s about 71% of the max profit of $122, well within my usual 50-75% profit target.
Not bad considering 3 weeks ago this trade was a $40 loss!
Normally I would consider taking this trade off now, since it’s already hitting my profit target. However because I already own 200 shares of WBA at $50, I actually like the idea of being assigned another 200 shares at $37.50.
That would lower my overall cost basis per share to $43.75. A lower cost basis also makes it easier for me to do things like sell covered calls to generate even more cashflow.
So what I’ve done is enter a good-till-cancelled order to close the trade at 15c. If it gets hit automatically before expiry on Aug 19, I take the profits and move on. If it doesn’t, we’ll deal with the possibility of assignment as it comes.
Trade update - SCHD
Two weeks ago I talked about how I’m buying time in SCHD to turn a profit - and the results are already beginning to show.
Circle 1 - Reading from left to right again. I have 1 contract of SCHD expiring on August 19 at the $73 put strike.
Last week there was a yellow “ITM” box indicating that the stock price was below my strike price of $73.
Now that SCHD has increased to $74.43, it’s “out of the money”, which also means the option is losing a lot of its value.
Circle 2 - the option is currently trading at 50c, that’s 67% less than last week’s price of $1.50
Circle 3 - the total credit I collected on this trade was $1.71 (remember it was $1.10 from the first trade, and an additional $0.61 from the roll - click here for the full details)
In other words, just from extending the duration of the trade, I turned this trade from a loser to a $121 profit. ($171 total collected minus $50 current price).
Once again you can see how trading options gives you flexibility that just buying stock doesn’t.
Similar to WBA, I already have 100 shares of SCHD at $78, so I’m open to buying another 100 shares at $73, which will reduce my cost basis to $75.50.
I’m taking the same action on this position, setting a GTC order to close it at 15c, and just wait for it to hit.
This update 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.