[Options] January Positions Review

Sean McLaughlin
December 28, 2020

As January gets under way, it’s time to review positions with January options that remain open (haven’t already hit profit targets or been stopped out). I'm getting started a little earlier this month because January expiration is on the 15th, and we're currently only 18 days until expiration. I don't want to wait through another long weekend before taking action. That's cutting it too close to expiration for my taste.

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.

Wow, after a few months in a row of not much to worry about heading into expiration, this month will keep us busy. At the time of this writing, I've got 5 positions that need continued monitoring (thankfully they are profitable) and a few that need to be closed now.

The rest have already hit our profit targets or stop loss levels. In the scoreboard below I denote the date we exited each position.

Here’s the scoreboard:

January positions closed for profits: $PINS (10/23), $BLNK (11/18), $SNAP (10/21), $ADSK (12/18)

January positions closed at a loss: $MJ (8/24), $EGO (9/24), $AMAT (8/21), $TWLO (9/8), $AMAT (9/8), $PDD (9/24), $PLAN (10/29)

Remaining Open Positions:

  • $CSX Long Jan 85 calls: I entered this trade on 8/12 and was able to close half of the position for $4.65 on 10/22, removing all original risk capital from the trade. My remaining calls are ITM so I'm going to give them room to work. Currently, $89 is the support level I want to see held. If this level is broken, I'll close the trade and book my profits. I'll trail the stop level higher if the uptrend resumes.
  • $HON Long Jan 185 calls: Similar story as CSX above. I entered on 8/26 and was able to sell half at $8.00 on 11/5. My remaining calls are in the money. My current stop loss level for HON is 205. Any close below that level and I'll close the trade and book my gains. I'll trail the stop higher if the uptrend resumes.
  • $DDOG Long Jan 100/120 calls: I'm running out of time here. I'm losing money and theta is now my enemy. I'm closing the trade today and booking a loss. Thankfully, there's still some premium left in the long calls, so I should be able to get out for only slightly less than the price I entered (which was $5.50).
  • $ZM Long Jan 500/550 calls: The trade is a bust. We're way out of the money here. Bummer, because it was looking so good at one point in mid October. I can still exit the spread for 30-40 cents, so I'll take it.
  • $PHM Long Jan 55 calls: Nothing to do here. We're OTM and the calls are worthless. Lottery ticket now.
  • $ON Long Jan 30 calls: I entered this position on 10/14. I was able to sell half at $2.50 on 12/8, removing my original risk capital from the trade. Right now, the calls are in the money, but not by much. My current action level is $30.50. If $ON close below this price, I'll close the trade. Whatever I sell for represents my profits in the trade. I'll look for opportunities to raise my stop level if/when $ON breaks out to new all time highs (it's close!).
  • $NVDA Long 550/600 calls: My calls are currently out of the money. Time is our enemy here. Time to close it down and salvage whatever we can.
  • $PRTS Long Jan 15 calls: I entered this trade on 11/16 and was able to sell half at a double ($1.30) on 11/19. That happened quick! And glad I did because the momentum stalled and now these calls are out-of-the-money. Time to close. There's still 45 cents bid in these calls. So at least we're booking a small gain.
  • $MU Long Jan 70 calls: I entered this trade on 11/23 and was able to sell half quickly on 12/2 for $4.00. Our "free ride" since has been mostly uneventful as $MU has been consolidating gains in this area for the past 3-4 weeks. My remaining calls are barely in-the-money (ITM). So I'll be keeping a tight leash on this one. Any close below $70 (the strike price), and I'll close my remaining contracts. Whatever I get at this sale will represent my profits in the trade. I'll trail my stop level higher if MU makes another run to or through the $75 level.
  • $XLE Short 37/44 Strangle: I entered this short premium trade on 12/16. So far, it's been a pretty uneventful ride (exactly what I hope for with delta neutral short premium plays). A few more days of sideways action and my profit target should be hit. I have a resting order to close this spread at a 62cents debit. I'm going to let that order continue marinating for now. If XLE breaks below $37 or above $42 before my order to cover is hit, then I'll just close the trade down win or lose.

Phew! That's a lot of action this month!

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

~ @chicagosean

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