Sold My NEE Long Calls

Back on 9/15 I bought 2 Nextera Energy (NEE) Calls on the announcement of a 4:1 stock split. At that time, I wrote that I didn’t think the Nextera stock split would act like the Apple and Tesla stock splits but I felt I could make a few bucks.

On 9/15 the announcement was that Nextera would split on 10/27. Most option buyers would have bought the option with the Expiration Date of 10/30. The Friday right after the stock split. Traditionally, a stock would pop the day of the split and the option buyer would sell late in that day. They would buy the next Expiration Date to pay less premium.

Me, I don’t like to buy short term options. I decided to go out a little further. I bought 2 contracts of the 1/15/21 Calls. I like to pay a little more and get a lot of protection against Time Decay. It turns out that the market had big down days from Oct 23rd to Oct 28th. And on the 27th, the day of the split, NEE had a down day also. Anyone who bought the 10/30 Expiration Date lost their investment. Me, I went out to 1/15/21 which protected me against that market down period.

Today I sold my position. This morning, with the market up, I placed a “Sell to Close” order with the premium of $5.10. I entered the price of $5.10 because that would give me a profit of $500. Remember, this is post split. I bought 2 contracts of the NEE 1/15/21 $300 Call at $17.90. Post split I sold 8 contracts of the 1/15/21 $75 Call for $5.10. The 8 contracts at $5.10 gave me a $500 profit.

I wanted out of this position before the election results. With only 3 months left until expiration, if the stock goes down, my position might not recover with Time Decay working against me.

Post 4:1 Split “Sell to Close”

9/15/20 – Buy to Open 2 NEE 1/15/21 $300.00 C @ $17.90

11/3/20 – Sell to Close 8 NEE 1/15/20 $75.00 C @ $5.10

Profit +$500

I signed up for this trade with the expectation of making a little profit. To tell you the truth this is about what I wanted. I would have taken more, but this is what I expected! I thought I would have been out on 10/27 but that didn’t work out. Buying the extra time turned a losing trade into a winning trade.

I know 1 of our readers mimicked this trade. Doris, I hope you are near your computer and know I exited. Good luck!

Now I have to go vote!

Successful trading,

Steve

The Options Coach