[Options] August Positions Review

This month, we have a number of open positions that need some action and/or attention in the days to come.

Here’s the scoreboard:

August positions closed for profits: $REGN (7/7), $BABA (7/6), $OKTA (7/6)

August positions closed at a loss: $TLT (6/4), $GDX (3/2)

Remaining Open Positions:

• $WSM March/August 90 Call Calendar: What a ride! This trade was unbelievable. Not so much in the profits it produced, but in the fact there is any profit at all! We entered this trade on January 22 when $WSM was trading at $76. Just 6 weeks later, the stock cratered to as low as $26! Looked dead in the water. The only thing that kept us in the trade was the fact that our risk was defined the whole way. This trade is a testament to sticking to the plan, so let's review the steps. On 1/22, we entered the Mar/Aug calendar by selling the Mar 90 calls and buying the Aug calls for a total net debit of $1.60 (our max risk). On February 7, the short March 90 calls decayed to less than 20 cents and we rolled them out to May 90 calls for a 15 cents credit. On March 2nd, during the first leg of the crash, we were able to cover these short May calls for 5 cents debit. There were no other 90-strike calls to roll them to for a credit, we just held on to the original long August 90 calls and assumed this trade will never come back. Well, low and behold, on May 26th, there were finally some August strike calls listed and the 90 calls had a nice bid after $WSM made a breakout back to highs! I sold short the July 90 calls for 45cents credit, re-establishing the calendar spread --- now July/Aug 90 calendar. Since June, $WSM has formed a high and tight base just below $88. During this time, our short July 90 calls expired worthless. Now here we are, holding naked August 90 calls with a net cost of $1.05 (the original $1.60 debit minus the roll credits we received). Currently, $WSM is still trading below our 90 strike, so this means it's time to exit our long calls. Theta will rapidly become our enemy over the coming weeks. The current bid in the Aug 90 calls is around $2.40 and we'll look to close this trade today and book our incredibly unlikely profit! Wow.
• $SNAP Long August 25 Calls: We purchased these calls on 1/22 for 70 cents debit and on 6/22 we were able to sell half of them for $1.40 removing our risk from the trade. And good thing we did because after briefly trading above our $25 strike back in early July, it hasn't been able to maintain that level and now we find our calls out of the money. We'll be closing this trade today to salvage what premium is left in these options (currently around 20 cents). This will represent our profit in the trade.
• $VIPS Long August 22 Calls: We purchased these calls on June 10 for a 65 cents debit. Quickly, on June 17 we were able to sell half of the position for $1.30. Since then, the stock has kept chugging along and is currently trading north of $23 per share. Our calls are in-the-money! So I'll be trying to hold this position as long as I can into expiration to let this stock run. Currently, my stop loss level is our strike -- $22 per share. If $VIPS closes below 22, then I'll exit this position. Otherwise, I'll be watching this position closely and trailing my stop loss level higher as it continues to move. Whatever we exit these calls for represents our profit in the trade. Let's hope it keeps going!
• $NKLA: Aug/Sept 35-strike Put Calendar spread. We'll likely be closing this position later this week at the conclusion of their earnings release. I wrote about our action plan here.

If you have any questions about these trades, email me here.

We'll cover all these trades in tonight's All Star Options Conference Call.

~ @chicagosean

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