Out of My 2 Walmart Calls

On Friday I bought 2 Walmart (WMT) Calls. Getting into this position was part of my “stock split strategy.” You can read about me getting into the position HERE.

I got into the position to hold it for 1 day. I wrote that I wanted to make a quick 40 to 50%. Knowing that I wanted to get out of the position in 1 day I could have bought the option with the Expiration Date much closer but I went out to March 28th. This cost me more money than if I bought the March 1st option but it gave me Time Decay protection. In today’s environment you never know if the market is going to move up or down.

Let’s say Walmart was down $2 today. My March 1st option would have been in trouble, it would have to recover and go up by this Friday. With my March 28th option I would have another 4 weeks for the stock to recover and go up.

With the stock at $175.10 I bought 2 WMT 3/28/24 $175 Calls at $3.35. This position cost me $670.

Buy to Open 2 WMT 3/28/24 $175.00 C @ $3.35 ($670)

Today the market opened with Walmart trading at the split adjusted price. The stock opened at $59.12, and I now owned 6 contracts of the WMT 3/28/24 $58.33 Calls. After a split you get a weird Strike Price. After the calculation I received a Strike of $58.33.

With my split strategy, when I get in the position the day before the split I want to get out the day of the split (today). I saw the opportunity to get out with a little over a $300 profit so I jumped out.

Sell to Close – 6 WMT 3/28/24 $58.33 C @ $1.75 ($1050)

Profit $380

The position cost me $670 and I got out with $1050. This is a profit of $380. This is a return of 56.7%. Pretty close to my goal.

If I opened the position with the Expiration Date of March 1st I would have made a bit more money and a higher Rate of Return, but I like buying the Expiration Date a little further out, which cost more money, but I am more protected. Buying options, especially short term options, is always a bit risky. I like having more protection I get with more time.

I plan on getting back into WMT in the next few days. I will be buying options but with this position my Expiration Date will go out about 6 months. Many times after a stock splits it will start to climb toward its pre-split price.

If you have any questions on my “stock split strategy” send me an email.

 

Successful trading

Steve

The Options Coach