Closing Out JRCC
In an earlier post on investing on news, I had sold puts on JRCC.
Well JRCC was up sharply in the past few trading sessions. I closed out my position by buying back my naked puts and netted a 38% profit (sold the puts for 1.95 and bought them back for 1.20).
There’s a chance the stock might go higher. But, I bought puts because it was a speculative trade and the idea was to make a quick (or somewhat short-term) buck. It went up, I made money so its time to get out.
Thats the good thing about options. They prevent you from getting married to your positions. That can be a dangerous thing if the market turns against you (speaking of which, I’m really glad I closed out my Countrywide puts after they started going against me. When I closed my puts, the stock was at $37 – now its almost $42).
Now if I could only figure out a way to make 38% returns EVERY 2 weeks!!!!!
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May 9th, 2007 at 6:12 pm
It’s great that this worked out! Selling naked puts is a very profitable strategy until there is a crash and you can’t get out in time. It’s a worse than a covered call then because volatility rises and the puts get more expensive to buy back. With the covered call you just need to sell the stock which results in a smaller loss.
May 9th, 2007 at 7:44 pm
its one of those “it works until it doesn’t” schemes
you’re absolutely right, which is why risk management is key. In case of bankrupcy, the worst-case loss was $805 per contract and the total loss would have been less than half a percent of total networth.
any loss that doesn’t force you to BK is a good loss!
May 10th, 2007 at 1:20 am
Oh and i also closed out my June $35 naked puts on STP for a 90% profit.
i still have july $30 naked puts, but if it drops below 30 i’ll buy them.
I owned STP for awhile but sold it once it started to look like it was trading in a range between 35-39 which its been doing for a while.
The naked puts were a way to get back in cheaper.