Riding the Waves of Options: A Look at Recent Trades

 The world of options trading can be both exhilarating and complex. As I navigate these financial waters, I've been diligently tracking my trades, and I wanted to share a glimpse into my recent activity and the lessons learned along the way.

A Quick Snapshot of the Trades:

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Note: Prices are per share, and profit/loss is for the single contract representing 100 shares)

Analyzing the Closed Positions:

So far, I've closed out two call option positions on SMCX, and both were profitable!

• SMCX $35 Call (Expired 5/16/2025): I sold this call for $3.40 and bought it back later for $0.80, netting a profit of $2.60 per share, or $260 for the contract. This trade highlights the potential of capturing time decay and potentially benefiting from the underlying price staying below the strike or increasing less than anticipated.
• SMCX $33 Call (Expired 5/16/2025): Similar to the previous trade, I sold this call for $2.00 and bought it back for $0.30, resulting in a profit of $1.70 per share, or $170 for the contract. Again, time decay worked in my favor.

These two closed call trades have contributed a total profit of $430 to my trading account. It's rewarding to see a strategy play out successfully.

The "Assigned" Put Option:

The put option on SMCX with a $36 strike price (expired 4/17/2025) took a different turn. Being "assigned" as the seller of this put means that the price of SMCX likely fell below $36 before expiration. As a result, I was obligated to buy 100 shares of SMCX at $36 per share.

While the initial sale of the put brought in a premium of $4.10 per share, my effective purchase price for the shares is $36 - $4.10 = $31.90 per share. The outcome of this trade now depends on the future price movement of SMCX and at what price I eventually sell these 100 shares. This situation underscores the risk involved in selling put options – you might end up owning the underlying asset.

Navigating the Open Put Option Positions:

Currently, I have four open put option positions:

• SMCX $26 Put (Expiring 5/16/2025): Sold for $3.40. My goal here is for SMCX to remain above $26 by expiration, allowing the option to expire worthless and me to keep the full premium.
• TSLQ $25 Put (Expiring 5/16/2025): Sold for $2.20. Similar to the SMCX put, I'm hoping TSLQ stays above $25 to realize the maximum profit.
• SMCX $25 Put (Expiring 6/20/2025): Sold for a higher premium of $5.40 due to the longer time until expiration. This gives SMCX more time to potentially move below the strike price, but also provides a larger buffer.
• SMCX $27 Put (Expiring 6/20/2025): Sold for the highest premium of $6.00 among the open puts, again reflecting the longer time to expiration and the slightly higher strike price compared to the $25 put.

For these open put positions, my strategy is to profit from time decay and for the underlying prices to remain above the respective strike prices by their expiration dates. However, I need to be vigilant and prepared to manage these positions if the underlying prices start to move unfavorably. This might involve rolling the options to a different expiration date or strike price, or even buying them back to limit potential losses.

Key Takeaways and Looking Ahead:

• Selling call options can be a profitable strategy when you anticipate the underlying price to stay below a certain level or increase moderately. Time decay works in your favor as the seller.
• Selling put options carries the risk of assignment, meaning you might be required to buy the underlying stock if the price falls below the strike. It's crucial to be comfortable potentially owning the stock at that price.
• Managing open positions is essential. Continuously monitoring the underlying asset prices and the time until expiration is crucial for making informed decisions about whether to hold, roll, or close a position.
• Understanding the nuances of each option type and the associated risks is paramount for successful options trading.

As May 16th approaches, I'll be closely watching the price action of SMCX and TSLQ to see how my open put positions fare. The assigned SMCX shares also require attention, and I'll be evaluating the market conditions to determine the optimal time to sell them.

Options trading is a continuous learning process. Each trade, whether profitable or not, provides valuable insights that contribute to refining my strategies and risk management. I'll continue to share my journey and analyses as I navigate the exciting world of options.

Disclaimer: Please remember that I am sharing my personal trading experiences and analysis for informational purposes only. This is not financial advice, and options trading involves significant risks.