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Options Trade – Philip Morris (PM)

April 29, 2014 by All About Interest 4 Comments

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My options trading has been a little quiet over the past couple of months.  I expect this to change now that tax time is over.  Today, I closed a position with a very nice profit.

I decided to close out a put I had sold in February.  PM has gone on a run and I have a large position already.  I decided to go ahead and take some profits instead of waiting until next January. In less than 3 months, this put earned me a cool $557!

What I LOVE about selling puts is that I’m doing so mainly on companies I already own or want to own more of.  This way it’s a win-win for me.  I’m paid to wait or I get assigned the stock at a price cheaper than where it was trading the day I sold the put.

Here’s a look at a 3-month chart of this put since I bought it:

PM_OptionTrade

The Trade:

I mentioned the original trade here.

I originally sold an $80 PM Put on 02/03 for 9.00 that expired Jan 17 ’15 collecting $900 in premiums.

Today I Bought-To-Close 1 PM $80 Jan 17 ’15 Put @ 3.43′

I profited $557 before commissions.

I currently have 10 open options positions and a total options profit of $675 for 2014.

My options page has been updated accordingly.

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Filed Under: Options Trades

Comments

  1. JC @ Passive-Income-Pursuit says

    April 29, 2014 at 3:51 pm

    I’ve been thinking of doing the same thing with my put option to go on and lock in a nice profit and free up some of the margin requirement. I could lock in about $500 in gains on the PM put and my KO put has done well too since shares are back up over $40. Closing both right now would give about $700 in profit. I think it might be time to set some limit BTC orders.
    JC @ Passive-Income-Pursuit recently posted…Did I Really Buy a Company For 470 Times Earnings?My Profile

    Reply
    • All About Interest says

      April 29, 2014 at 4:08 pm

      Hi JC,

      I keep thinking we are going to see some sort of correction so I pulled some money off the table. I’ll be looking for other puts to sell now that I have freed up some cash. I still hat MAT, TGT and KO puts that have done extremely well and I’ll be looking to exit possibly.

      Nice job on selling those puts at the right time. I still look at selling puts as a nice compliment to my overall strategy.

      Thanks for stopping by!

      Reply
  2. My Dividend Pipeline says

    April 29, 2014 at 6:45 pm

    AAI,

    I would like to learn more about options. Is there a good book or website you could recommend. I also remember that you were assigned some shares of Coke a few months ago in the mid 30’s. Do you make typically make option decisions based on companies you would like to own?

    Thanks,

    MDP
    My Dividend Pipeline recently posted…Weekly Sharebuilder PurchasesMy Profile

    Reply
    • All About Interest says

      April 29, 2014 at 8:54 pm

      Hi MDP,

      If you check out my options page, you’ll notice my open options are primarily puts that I’ve sold against companies I already own. The KO put was a prime example. KO happened to have dipped and I was assigned shares. However, I got to buy shares at a cheaper price than where KO was originally trading when I sold the put. That’s the best part about it. If KO had gone up in price , then the options would have expired and I would have gotten to keep the entire premium.

      I wrote an article that is linked on my options page also that’s sort of an introduction to writing puts. It might be helpful. All of the options information I’ve learned has been from the internet. I’ve read from several sources and studied charts. However, for writing puts, it’s fairly easy to understand; if the stock price is trading above your strike at expiration, your put expires worthless and you keep the premiums. If the stock price is trading below you strike at expiration then you are assigned shares with a cost basis that takes into account the premiums received. The only other option is that you close out the position early for a gain or loss. If you stick to only companies you want to own, then you never have to close the position early for a loss.

      I hope that helps a little.

      Thanks for stopping by!

      Reply

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