Out of My Dell Call

On Tuesday I bought 1 contract of a Dell option. When I posted that position I said I wanted to grab a $500 profit from this trade, and I said, “hopefully by the end of the day.” I also said that would be doubtful. Today, the next trading day with yesterday being a holiday, I just sold that position with the $500 profit I was hoping for.

 

6/18/24 – Buy to Open 1 DELL 1/17/25 $145.00 C @ $26.00

6/20/24 – Sell to Close 1 DELL 1/17/24 $145.00 C @ $31.00

Profit +$500

 

Investing $2600 with a $500 profit is a 19.2% gain. Not bad for a 1 day position.

I didn’t have to invest $2600 but I did because I had an Expiration Date of January 2025. I don’t like to buy options but if I do I buy with a lot of time protection. If the stock takes a dip I have plenty of time for the stock to recover. I could have bought a 1 month option which would have cost me about $900. I would have made the same money, $500, and the Return on Investment would have been 55%.

When reading your options books do not fall for the high percentages they preach. Short term options are very dangerous. If the stock takes a dip there is not enough time for the stock to recover and Time Decay kills your premium. And if there is only a few weeks for the option to expire, Time Decay is very quick. The value of the option melts away very fast. The only time I buy short term options is with my Stock Split Strategy.

If you have any questions on Time Decay send me an email.

 

Successful trading,

Steve

The Options Coach