The market opened higher and soon after the open the market was up triple digits. This was as a result of a good August jobs report. “Main Street beats Wall Street” readers know I have a 100 contract Put on U.S. Steel (X) which expires today. The Strike Price for this Put is $19.50. If X closes below $19.50 I will be put 10,000 shares of X at $19.50. At the open the market went up and X followed along which was good for my position because I really don’t want to buy 10,000 shares of the stock. It’s been moving down lately! The market was up triple digits and X was up to $19.93. Looking good! Well not long into the trading day X started moving down. The market was still up but X was moving down! X was moving down fast, through the $19.80’s, $19.70’s, $19.60’s and it continued down. When it was all the way down to $19.07 I decided to Short 10,000 shares. I really don’t like to Short but the way it was moving down I decided to capitalize on the decline. I did not plan on staying with the Short long and basically I was gambling! Once in a while I get weak! The stock got down to the $19 mark and hung there for a few minutes. Then it broke the $19 level and I put in an order to buy the 10,000 shares to close the trade. I put the order in to buy at $18.90. Within a minute the stock went to my buy order price and I was executed. I wiped my brow, sat back in my chair and made the sign of the cross.
I do not like making this trade and I made a similar trade yesterday; I’m glad they both worked out. I Shorted X at $19.07, meaning I sold the stock and I bought the stock at $18.90. That’s a $.17 gain. This trade was 5 minutes. I didn’t even have a chance to post the Short because I was watching the stock like a hawk. The $.17 gain on 10,000 shares is a profit of $1700 in 5 minutes. It worked out great but I don’t like doing it. It’s against my strategy and its very stressful. If the stock reversed and went back up it would have been a problem. Any Short on a volatile stock gets a Risk Factor of 5. Here’s the Short and buy orders:
Short 10,000 shares X @ $19.07
Buy 10,000 shares X @ $18.90
Profit +$1700
As I finish writing this post U.S. Steel is at $18.80. Still going down!
Now I have to figure out what I’m going to do with my Put expiring today. It is In-the-Money! If it stays In-the-Money till closing I’ll have to do a Roll Out or have the stock put to me. I’ll wait to see where it is at closing.
Steve
The Options Coach