Earlier I sold a Naked Call on SCTY that went against what I normally do or my strategy. The stock had a big jump this morning on the news that Elon Musk wanted to buy the company. I do have a lot of respect for Musk but I didn’t like the way this looked. The point is, after listening to the analysts speak on CNBC I felt the stock was not going to stay up where it went earlier. I sold the Call when the stock was at $23.15 ($.65 In-the-Money) and the premium was $.85. I planned on keeping it until expiration this Friday but the stock came down more then I thought. With the stock down to the $22 area and the news due out tomorrow about the British leaving the EU, I decided to take the profit and run. Plus this trade had a Risk Factor of 5. I put in an offer to Buy to Close this position at $.45 and I was executed. On the sale I received $.85 ($1700) on 20 contracts and bought to close for $.45 ($900). This is an $800 profit and this deal is over. I’m not normally a day trader but if I can get out in an hour making half the money I would have made if I held to expiration, I get out! Here’s the orders to Sell and to Buy to Close the option:
Sell to Open 20 SCTY 6/24/16 $22.50 C @ $.85 (+$1700)
Buy to Close 20 SCTY 6/24/16 $22.50 C @ $.45 (-$900)
Total Profit +$800
Money in the Mattress
For you Grasshoppers you must understand this sale was a Short position. You must understand how shorting works.
Getting out of this trade fast with a profit made me very happy! Take a look at my trade history. I made plenty of trades for more money. But it’s a tough time of year to make money and this was a dangerous trade. It’s nice when things go your way….. Back to work!
Steve
The Options Coach