[Options] December Open Positions Review

Sean McLaughlin
November 29, 2019

As November draws to a close, it's time to review positions with December options that remain open (haven't already hit profit targets or been stopped out).

Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice -- it's time to take action. 

December positions closed at a profit: $XOP (on 11/15)

December positions closed at a loss: $SMG (on 9/20), $BA (on 10/21).

Open Positions:

  • $IBB Nov/Dec 90 Put Calendar Spread: This trade is a bust. The short November puts expired worthless (good), but the remaining long December puts are comically out-of-the-money and have zero bid. Nothing to do here. We're basically holding a lottery ticket with near zero likelihood of a payout between now and December 20.
  • $WMT 97.50/110 Bullish Risk Reversal: Nice winner with some potential additional upside remaining. We entered this trade on May 28 shorting Dec 97.50 puts to pay for long December 110 calls. On June 10, we were able to sell half of our long calls and use those proceeds to cover all of our short puts --- leaving us holding half of our long calls risk free! And the ride has been worth it. Our long calls are currently more than $9 in-the-money and are basically trading dollar-for-dollar with movement in the underlying. This means there is no premium to protect. The plan going forward is to exit our long calls on the break of any near-term support. The level I'm currently watching is 116.75. If $WMT closes below this level, I'll exit the trade and book our nice gains. Hopefully, $WMT will resume it's march higher and I'll have opportunities to move my stop-loss level higher.
  • $ALLY Long Dec 35 Calls: We entered this trade on July 8 for an 80 cents debit. As per our plan, we exited half of these calls at $1.60 on Sept 10. That was a fortuitous exit as we nearly top-ticked the stock. The remaining calls are currently out-of-the-money, but still are sporting a 20-25cent bid. We'll be exiting these calls early next week, booking a skinny profit.
  • $ZBH Dec 140/150 Bull Call Spread: We entered this trade on August 28 and it only just started to work in the last few weeks. Currently, $ZBH is trading smack dab in the middle of our strikes around 145. As such, I'm going to give this position a very short leash. I've got a resting order to close this spread at $6.75 (my profit target). But if $ZBH closes below 145, that will be my signal to exit. Unless there's a dramatic move, we should have no trouble exiting this trade at a profit.
  • $CE Long Dec 130 Calls: We entered this trade on Oct 29 for $1.15 and we were able to close half on Nov 8 for $2.30. The remaining calls are currently out-of-the-money but still have a nice bid of 80cents in them. Theta is our enemy now and I'll be exiting this trade early next week. Whatever I get for the sale will represent my profit in the trade.
  • $TLT Short Dec27 (weekly) 135/142 Strangle. This trade has weekly options will a little more time to expiration than the traditional monthly expiration options. It's currently working so I'm going to let my resting order to close at my profit target (buy at 83 cents) marinate for a bit. If $TLT closes above 141.50 or below 137.50 before my profit target is hit, I'll just close the position down -- most likely for a small gain. I won't want to hold beyond those levels as gamma will start to wreak havoc on my position P/L volatility.

If you have any questions on the management of these open positions, All Star Options subscribers can email me here.

~ @chicagosean

 

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