Well, I’m on a bumpy road! It was starting to concern me so I took detour. The market opened up modestly and so did U.S. Steel (X). But a few minutes into the trading day X starting heading down. With the stock in the $19.20 area I started to think about an adjustment trade. The problem is a few days ago I sold a 100 contract $19.50 Put. This means if X closes below $19.50 tomorrow (Friday), someone will be selling me 10,000 shares at $19.50. If the stock goes down to, say, $18.50 I would pay $19.50 for a stock at $18.50. I would own the stock, but my account would be down $10,000. I’m really not liking the way X is moving as of late so I made a move. I Shorted 10,000 shares of X. What this does is, if X continues down, my Put will lose value but I’ll be gaining value on my 10,000 shares Short. For Grasshoppers this can get complicated. I’ll only reporting what I’m doing and reiterating that adjustments trades are very important when trading options. I sold the Short at $19. I’ll be watching this very closely! If X continues down I might buy back my Short and Roll Out the Options. If X reverses and goes up I’ll have to make a decision on the Short while I leave the option alive. I’ll be watching and be filling you in as I go. Here’s the Short order:
Short 10,000 shares X @ $19
Stay tuned!
Right before I hit send on this trade post I bought back my Short for $18.90. This is live trading!….. Please understand what Shorting is. I sold the stock at $19 and I bought the stock at $18.90. Shorting goes in the opposite direction at buy low and sell high. With Shorting you sell high first and buy low to close the trade. This is what I just did. On the 10,000 shares I made $.10 in 5 minutes. That’s a profit of $1000. This money is going in my mattress. Here’s the buy order:
Buy 10,000 shares X @ $18.90
Profit $1000
Please send questions on this and let me know you’re alive!
Steve
The Options Coach