I’ve decided to keep track of my options trading again and I’ve started this month with a bang. Yes, it’s a catchy title but please let me explain.
Below are the actual trades:
|Date||Action||Ticker||Expiration||Strike||Call/Put||Qty||Price||Amount||Fees||Net||Days to Exp||Current Price||52wk range|
|7/6/2017||Sell||MO||9/21/2018||75||Call||1||$5.15||$514.96||$5.45||$509.51||558||$74.25||60.82 – 77.79|
|7/6/2017||Sell||MO||1/18/2019||90||Put||1||$19.00||$1,899.93||$5.45||$1,894.48||439||$74.25||60.82 – 77.79|
|7/6/2017||Sell||BDX||1/19/2018||210||Put||1||$18.00||$1,799.93||$5.45||$1,794.48||194||$197.79||161.29 – 197.85|
|7/6/2017||Sell||MDT||6/15/2018||97.5||Put||1||$11.25||$1,124.95||$5.45||$1,119.50||341||$87.96||69.35 – 89.72|
|7/6/2017||Sell||JNJ||6/15/2018||150||Put||1||$19.50||$1,949.93||$5.45||$1,944.48||341||$132.54||109.32 – 137.00|
The total of these trades gave me a little over $7262 Net. I’m approved for “naked” options trading meaning I can sell puts on companies I don’t own and without having the cash to purchase said security. Now, I do have a covered call on MO since I own 100 shares and sold 1 call.
My put selling was 3 giant medical companies plus MO. These companies are not going anywhere and I don’t mind purchasing shares if needed. I’m basically asking mr. market to give me some assistance in sending their share prices higher. For instance, if shares of Johnson and Johnson are over the strike of 150 on 06/15/18 then the put will expire worthless and I’ll keep the entire $1,949.93 as profit. Let’s say JNJ is trading at 135 around expiration, about 15 off where I want it. That means the put is worth 15 x 100 or $1500 to buy back if I choose not to execute it.
Am I crazy you might ask? No, not entirely lol. So what happens in the case that one of these companies is lower near expiration? Well, I have a few options.
I can do nothing and I’ll be required to purchase 100 shares of said security at the strike price. It’s sort of like I’m buying the company right now at a discount. For instance, MO is at $74.25/share. I have to pay $90/share but I received a $19 premium or $1900 which is the same as if I purchased the company for $71/share. Now I would miss a couple of dividends but I’m still better off with the put.
I can decide to purchase back the put for more money at a loss of approximately ($71/share – current share value) x 100.
Third option is to “roll” the put forward. What this means is that I simultaneously purchase the put back and sell another longer dated put so that I haven’t lost any money. I’ll show you guys how this works around expiration if needed.
Well, here you are. My crazy put selling frenzy! I need medical companies to stay in favor and I’ll be a happy camper.