Yesterday I took advantage of the strength in GDX (precious metal miners ETF) and closed the transaction, without a commission as follows:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
09/07/2012 BTC 2 GDX Sep 22 2012 42 Put @.04 -8.04
This wild ride has come to an end with a profit in tow. We earned $504.36 in 5 1/2 months. Due to the rise in the stock price our average maintenance was lowered to ~2100 in average margin maintenance. This equates to a 24% return or 52% annual.
We rode this trade through a serious decline, a bottom and then a rise. I stuck to my guns and always sought to roll out and/or down for a net credit. In July I was able to roll down and out for a net credit and lower the number of contracts I had in play thereby lowering the amount of capital committed to the trade. Amazingly I got paid to do this.
This trade is my poster child for the power of rolling options. A five and a half month hold is longer than usual for me but at the end it was an educational, challenging and most importantly, a profitable trade.
Hi
ReplyDeleteNice trading. You still made a nice profit even when reducing the number of contracts.
Have you ever been unable to roll down/out and been assigned 'unwilligly'? I've only just selling out this year but they are always cash secured in case I get assigend on all contracts.
This of course limits the numbersw of puts I can sell and the profits I can make.
Selling puts on margin seems very profitable, but too easy (perhaps I'm too suspicious!). There must be some risks that are not obvious with this approach.
Thanks
Robert
Sounds like an excellent idea
DeleteHi Robert, I have never been assigned unwillingly. I'll roll the option before expiration but I think assignment is more common with calls when a party wants to collect the dividend.
ReplyDeleteI use only about 50% of my margin to avoid margin calls. There are definitely risks. It's never good if the stock tanks but it can be navigated through.
Good luck with your trading. Keep us posted :)