Profit Update

Profit Update

Hello Smart Option Sellers! Intel (INTC) We were filled on the Intel buy-back order from yesterday. You know what that means - we rang the register! Here's what we did: Bought back (bought-to-close) all of the INTC August 2017 $28 put options for an official buy price of $.05 per contract as a closing transaction (bought-to-close). We originally established (sold-to-open) this put option on February 8, 2017 for a sale price of $.25 per contract, and now we took gains by buying it back (bought-to-close) for $.05 per contract. With the fill at $.05, it locked in a gain of $.20 per contract ($20 for every contract traded) and a return on margin (ROM) of roughly 3.5% in just under four month's time. If you like to annualize, that's a nice 14% return. For those of you who need a refresher on margin - here's the deal: Whenever we sell an option contract, your broker requires you to maintain a "margin requirement". The margin requirement is just part of your account funds that need to be held aside while the trade is active. You are not borrowing money from anyone nor are you paying margin interest to anyone. The margin requirement is typically 20% of what it would cost to buy 100 shares of the stock at the strike price. In this case: 20% x $2,800 = $560. So our margin requirement is $560 per each put option contract sold. Our profit on this trade is $20 for every contract sold. The return on margin (ROM) comes out to $20/$560 = 3.5%. The fill at $.05 also allowed us to capture 80% of the full profit potential ($.20 gain/$.25 full potential = 80%). We like to close trades early before expiration when we can capture at least 80% of the full profit potential (my "80% Rule"). This is just smart money management and it allows us to lock in gains and free up mone