Profits Locked In!

Profits Locked In!

Hello Smart Option Sellers! Lots to discuss today, so read through the whole alert, even to the Warren Buffett section. Verizon (VZ) We had no trouble getting filled on our profit-taking trade yesterday on Verizon. Here's what we did: Bought back (bought-to-close) all of the VZ October 2017 $39 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 June 9, 2017 for a sale price of $.28 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 $.23 per contract ($23 for every contract traded) and a return on margin (ROM) of roughly 2.95% in just over three month's time. If you like to annualize, that's roughly an 11% return. Here's how the margin calculations break down: 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 $3,900 = $780. Your margin requirement at your broker may be slightly higher or lower. Ask them. So our margin requirement is $780 per each put option contract sold. Our profit on this trade is $23 for every contract sold. The return on margin (ROM) comes out to $23/$780 = 2.95%. The fill at $.05 also allowed us to capture 82% of the full profit potential ($.23 gain/$.28 full potential = 82%). When selling options (calls or puts), your