RH Split Strategy Trade

The last week in March RH announced a 3:1 stock split. We have a few splitting stocks on the calendar, and I’ve been trying to write about them but my life is so busy. In fact right now I’m in Boston with my wife’s family.

The companies that announced splits in addition to RH are Amazon and Google, which are 20:1 splits. I didn’t make a move with Amazon or Google yet because the stocks are over the $3000 mark and options are very expensive. Plus the stocks have not been moving. RH is in the $330 area. RH did not announce a split date yet. They will after their upcoming board meetings. Amazon splits on June 6th and Google on July 1st. I think these will be great split strategy candidates after the split. The stocks will be much cheaper.

On the announcement I tested my split strategy with RH with the buying of a 1 contract position. The announcement is one of the buy-in times with my split strategy. I bought 1 contract of the RH 5/20/22 $330 Call for a premium of $19. This cost me $1900. This morning I sold that position for $30. This is an $1100 profit.

 

4/1/22 – Buy to Open 1 RH 5/20/22 $330.00 C @ $19.00

4/11/22 – Sell to Close 1 RH 5/20/22 $330.00 C @ $30.00

Profit +$1100

 

I invested $1900 and made $1100 profit. This is a Return of 57.8%. With the market down today, and with the way the market has been moving, I decided to sell with the $1100 profit. Also with a 5/20/22 Expiration approaching it was time to get out. If RH pulls back a little I will be getting back in. If I get back in I’ll go out a little further with the Expiration Date.  Maybe June 17th or August 19th. These are the next 2 dates after May. I will be watching for the split date, which will help with my buy-in decision.

 

Successful trading,

Steve

The Options Coach