This was a closing bell I was watching closely. I was watching all my position for a good reason. Of cause the big reason is today was an Expiration Day. I was watching Yelp because I had a $38 Call expiring and the stock closed at $37.95 so I keep the premium, plus I keep the stock. GPRO had a few upgrades today so I was watching to see where that was going. And I put in a buy order to buy my way out of my U.S. Steel (X) LEAP. Yelp and GPRO I’ll cover in my week ending report. U.S. Steel I’ll go over now because I was executed on my trade at the close.
My X LEAP trade was becoming complicated and I’m glad to get it off my books. If you remember back on 7/5 I sold a 50 contract Call (1A) on X. And on 7/7 I sold another X 50 contract Call (2A). Both of these trades went against me and I had to do a Roll-Out on each one to prevent me from losing money. Below are the trades and the Roll-Outs, and below that I’ll explain how this trade ended.
(1A) 7/5/16 – Sell to Open 50 X 7/8/16 $18 C @ $.31 (+$1550)
(1B) 7/8/16 – Buy to Close 50 X 7/8/16 $18 C @ $1.00 (-$5000)
Originally I sold a Call on 7/5/16 for a premium of $1550. When that didn’t didn’t go my way I did a Roll-Out. I bought that Call back for $5000 (I’m now down $3450) and sold another Call (below) for the premium of $5850. At this point I’m up $2400.
(1C) 7/8/16 – Sell to Open 50 X 7/22/16 $18.50 C @ $.17 (+$5850)
(up $2400 on the Roll-Out)
At the same time this was going on I had the second 50 contract going that I sold on 7/7/16. Since this was with the same stock this also wasn’t going my way.
(2A) 7/7/16 – Sell to Open 50 X 7/15/16 $18 C @ $.69 (+$3450)
When this second 50 contract Call(2A) wasn’t going well along with the Roll-Out of the first Call (1C), I decided to combine them together and do a 100 contract LEAP Call (3A) expiring in January. I bought back (1C) and (2A). See the orders below.
(1D) 7/12/16 – Buy to Close 50 X 7/22/16 $18.50 C @ $2.20 (-$11,000)
(2B) 7/12/16 – Buy to Close 50 7/15/16 $18 C @ $2.70 (-$13,500)
At this point if you add (1A) +$1550, (1B) -$5000, (1C) +$5850 & (1D) -$11,000 I am down -$8600.
And from the second Call (2A) +$3450, (2B) -$13,500 I am down -$10,050
You add up these two numbers from the two 50 contract Calls, I am down -$18,650.
After I bought my way out go the two 50 contracts Call for a total of $18,650, to complete the final Roll-Out I sold the 100 contract $21 LEAP expiring in January. The Call brought in a premium of $3.10. On the 100 contracts (10,000 shares) the total premium was $31,000. Here’s the order:
(3A) 7/12/16 – Sell to Open 100 X 1/20/17 $21 C @ $3.10 (+$31,000)
I really hope this all makes sense to you. I know it gets complicated but this is what I did. Now I have the 100 contract Call and the stock is going down which means my Call is gaining value because it’s Short position. Well, that Call I sold for $3.10, today at the close I bought it back for $.70 to close the whole mess. This cost me $7000 on the 100 contracts to get out of the position. Let’s do some more math and see how it worked out. Brought in $31,000 on the sale of the LEAP and spent $7000 to get out for a gain of +$24,000.
The result of the (1) 50 contract Call I was -$8600. The result of the (2) 50 contract Call I was -$10,050. And (3) the LEAP, I was +$24,000. This is a total of plus $5350 and this deal is over! GOOD RIDDANCE! Here’s the “Sell to Close” order:
9/16/16 – Buy to Close 100 X 1/20/17 $21 C @ $.70 (-7000)
Profit +$5350
I know this entire trade sequence is a mess but this is what I did. Do not let this deal discourage you. It’s not always like this but this it the kind of stuff the books will never tell you. These are trades you have to do sometimes to end with a profit. Not only did I end with a profit but it’s a nice profit, $5350.
I’m sorry to say this is not the end of my involvement with U.S. Steel. This whole deal started with a Naked Call. The stock went all the way up to $26 which was very scary with a 100 contract Naked Call. As the stock was coming down from $26, I decided to cover the Call when the stock was at $19.50. So, at this point I still own 10,000 shares at $19.50 and the stock closed today at $15.91. This is not a good situation and this is one of the reasons I bought my way out of the LEAP instead of holding until expiration. I wanted to free up some margin and now I’ll sell some more Call for insurance if the stock continues to fall. I not only had this LEAP sold on X, I had another 100 contract Naked Call which also expired today. And I had other Calls in the last few weeks. Collecting all these premiums help my account from falling as the stock was falling. I will manage these 10,000 shares with Calls until it comes back above where I bought. I am determined to make this stock holding a profit!
Have a great weekend! Watch for my Week ending report.
Steve
The Options Coach