Trade Results - Intel Corp.
Trade Results Hello Smart Option Sellers! Before we get to the trade results, I just wanted give some quick housekeeping updates. The Warren Buffett report that I've had for sale on the site, and which I include a link for at the bottom of every alert, will be going up in price from $10 to $49 this Friday at 5pm EST. If you have not purchased it yet for the $10 price tag, now's your last chance. Also, please have a look at my Blog that I update quite frequently. It has my thoughts on various investing items and answers to many questions about options trading. It's a great way to get more insight into what I'm thinking and what people are asking about. Have a look from time to time if you want, and please help me spread the word. You can share each Blog post to your own Facebook or Twitter page by clicking on the social buttons at the bottom of each post. You can make comments, and please, tell your friends about us too! This will help the Smart Option Seller gain traction and recognition in the online option's world. My goal is to raise our visibility and let others know about the great things we're doing here. All help is appreciated! Thank you! Now, onto the trade results. Intel Corp. (INTC) We were filled with no problem yesterday on the INTC buy-back order at $.05 per contract. Here's what we did: Bought-back (bought-to-close) all of the INTC January 2018 $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 August 22, 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 4.1% in just two month's time. Nice and short, just the way we like it! If you like to annualize, that's roughly a 24% return. To understand how the margin works and the calculations involved, here's the breakdown: Whenever we sell an option contract, your broker will require you to maintain a "margin requirement". The margin requirement is made up of funds that are already in your account and will need to be held aside while the trade is active. You are not borrowing money from anyone nor are you paying interest to anyone. Some people can confuse the margin requirement with "trading on margin". They are completely different things. We are not trading on margin when selling put options. 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 $1,800 = $560. Your specific margin requirement at your broker may be higher or lower than that. If you are unsure, just ask them. So for this trade, our margin requirement is $560 per each put option contract sold. Our profit on this trade turned out to be $23 per each put option contract sold. Hence, the return on margin (ROM) comes out to $23/$560 = 4.1%. Also, the fill at $.05 allowed us to capture 82% of the full profit potential ($.23 gain/$.28 full potential = 82%). When selling options (puts or calls), your full profit potential is capped at what you initially sell the option for. In this case, that amount is $.28 per contract. We like to close trades early (buy-to-close) before expiration when we can capture at least 80% of the full profit potential. This is called my "80% Rule". This is just smart money management and it allows us to lock in gains and free up cash to put towards new trades. If you did not place your trade yet, or did not get filled yesterday, just keep your order working "GTC" at $.05 per contract. Congrats to everyone who was involved with this one. That's all for now. You can reach us here Regards, Lee Let's Grab That Cash!