I owned 10 Square (SQ) 6/19/20 Expiration Date options which I just sold.
Today we are ending our 1st full week of 2020. About 10 minutes ago the DOW broke the 29,000 level for the first time ever. In the 1st 10 days of the year my account is up $20,000. I must say, I loved the way the market moved in 2019, and I also love the way 2020 is starting off. Another thing I must say is I’m getting very nervous. I’ve been watching the market for 30 years and I never saw anything like this. The market is up every freaking day!
After a great 2019, up 101%, I would really like not to give muck back if there is a correction. I don’t think the market will correct much, but if it does I would like to have cask available to buy in at lower prices. I’m looking at my active positions and I’d like to cut my positions considerably. Not including any position in a Wealth Builder portfolio. These I’ll hold through the bumps. Today I started with SQ. SQ has been receiving upgrades and received another today by Stephens. However, I really don’t like the way the stock has been moving. Or, I should say the way the premium is reacting to the stock price moving in conjunction with Time Decay. I like the way it’s been moving if you own the stock, but the position I sold today is an option which expires in June. It still has 6 months to expiration, but if there is a pullback Time Decay could put me in a losing situation. I’ve owned this position since Sept. Today I decided to get out with a $500 profit.
9/5/19 – Buy to Open 10 SQ 6/19/20 $65.00 C @ $8.75 ($8750)
1/10/20 – Sell to Close 10 SQ 6/19/20 $65.00 C @ $9.25 ($9250)
Profit +$500
This is not a very large profit, but when trading options when you have a profit you don’t have a loss! This is a 5.7% return in 4 months. Not my normal goal with options but it’s not bad!
When managing option positions you must understand Time Decay and how far a premium can drop with a pullback and time passage. Even with upgrades, and SQ being a great company, I felt with my recent profits and my fear of a pullback, this was a good position to move on from.
I also own 1000 shares of SQ which I’ll be assigned on today at the close. These shares are involved in a Covered Call. This will free up a lot of cash.
Other positions I’m trying to get out of are options also expiring in June. These are with DISH and PayPal. I’m hoping DISH makes a little move and I can get out breaking even. However, PayPal will be a loss. It’s just a matter of how much of a loss. Each position is 10 contracts. I may start unloading PayPal a few contracts at a time in hopes it will get into the positive with remaining contracts while cutting loses with some. I bought this option with the stock up around $120 and it had a big pullback. The stock is at $113.50 today. Even with the stock moving Time Decay is counteracting the gains in the stock price. When buying options you need the stock to move in your direction IMMEDIATELY!
I’m set to have a very nice 1st full week of the year. Watch for my results.
Successful trading,
Steve
The Options Coach