7/9/2014 (12:16 pm, PT)
sold (to open) 6 August 2014 $113 puts at $1.33
Reasons for initiating this trade:
- probability of success: 68%
- almost at the bottom of stochastics (see chart)
- candles at the 50 EMA (possible support)
8/13/2014 (9:31:41 am, PT)
bought (to close) all 6 puts at $0.49
Reasons for closing this position:
- my short August 2014 $113 puts are FINALLY out-of-the-money (barely!!)
- two days left until expiration (two days are a long time when the strike price is barely OTM)
- almost at top of stochastics (see chart)
- TAKE PROFITS! (VERY important)
NET PROFIT: $480.68 (in 5 weeks)
THE LESSON
If I had bought 600 shares of IWM on 7/9/2014 ($116.56 average) and sold them on 8/13/2014 ($113.18 average), I would have LOST $2028 (approximately).
However, by SELLING PUT OPTIONS instead, I have a PROFIT of $480.68!
That's why I LOVE SELLING PUT OPTIONS.
On 8/1/2014, IWM traded as low as $109.86 (see chart) . My August $113 puts were "in-the-money" by nearly $3.14. If I had panicked and closed my position on 8/1, I would have ended up with a pretty large LOSS (nearly $1100).
However, because these options didn't expire until 8/15, I decided to hold them and wait. As long as the "extrinsic" value of those options were still large, I was not at risk of early assignment.
-----------------------------------------------
Learn to SELL PUT OPTIONS and GET PAID up front. It's easy, fun and profitable.
Learn on your own for FREE at www.youtube.com/user/moneyandlilia or pay for 1-on-1 training (details here).
