Trade Results - ORCL
Trade Results - Oracle (ORCL) Hello Smart Option Sellers! We were able to get filled early yesterday on the first batch of buy-back orders on ORCL at our price of $.07 per contract. If you have not been filled yet, keep your order working "GTC". Currently, the market on the put option is $.07 bid/$/08 offer. It will only be a matter of time until everyone else gets filled. Here's what we did: Bought-back (bought-to-close) all of the ORCL March 2018 $37 put options for an official buy price of $.07 per contract as a closing transaction (bought-to-close). Here are the profit details: We originally established (sold-to-open) this put option on September 22, 2017 for a sale price of $.30 per contract, and now we took gains by buying it back (bought-to-close) for $.07 per contract. With the fill at $.07, it locked in a gain of $.23 per contract ($23 for every contract traded) and a return on margin (ROM) of roughly 3.1% in a bit under three month's time. If you like to annualize, that's roughly a 12.5% 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 $3,700 = $740. 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 $740 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/$740 = 3.1%. Also, the fill at $.07 allowed us to capture 76% of the full profit potential ($.23 gain/$.30 full potential = 76%). 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 was $.30 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. As mentioned yesterday, we took early profits at just slightly under my 80% Rule. I felt it was prudent since we still had over three months until expiration and we already captured a solid portion of the profits. No sense leaving ourselves exposed for the rest of that time. Plus, with earnings being released after the bell today, it just made sense to take the money and run. I still don't expect any major surprises with the earnings report, so if it turns out to be a non-event, all the orders to buy back the put option will be easily filled tomorrow (if you aren't filled by then). That's all for now. You can contact us here Regards,
Lee Let's Grab That Cash!