Originally Posted by
Siriusowner
Ok let me give you an example of one trade I made a few months ago and that is closing this month:
Back on May 5/9 or 5/10 CENX was trading at $7.45. I sold 6 May $5 puts for $0.50. So I made $300 and owned nothing other than an obligation to buy 600 shares of CENX at $5 if by expiration CENX was trading below $5. The trade went south and by expiration CENX was trading @ $4.75 so I had to buy the shares so I spent $3000-$300=$2700 to buy the 600 shares. I was still in the green because CENX was trading @ $4.75 and my actual cost was $5-$0.50=$4.50. I coukd have sold the shares and still have made $150.00. Instead I decided to keep them and wait until it rised toward $7.50. It took about a week, it went to $7.15 or so... I could have sold them but instead I sold the June $7.50 call for $1.25 so I made another $750.... Are you keeping a tab ?
The call expired worthless in June so I kept the shares and the $750 + $300 = $1050, so with a $3000 I already made $1050 in 45 days. It gets better....
I also sold the July $10 call for $0.50 and the August $10 call for $1.50... I will most likely get assigned this month since CENX is trading around $11.00
How much more I made: $300 for July and $900 for August so: $1050+ 300 +900 =$2,250 in just 3 1/2 months with $3000 investment.... Not bad uh ?
...But wait a minute something's missing... That is right I will get assigned !!!
So my cost ? $5.00 and will sell at $10 so $10- $5 = $5 x 600 = $3000 !!! + $2,250 = $5,250 !!!
Almost 200% in 3 1/2 months. You'll say that is peanuts but in the same period I traded about 30 issues with about the same outcome (of course I traded more but 30 is an average of what will be closed in the green frm May to August, I almost always do not close on the red unless absolutely necessary (for example if one leg of a calendar or diagonal gets assigned or something like that) and in December for tax purposes).
30 x 5000 = ? in pure profits
I also trade futures, sugar anybody ? ... In futures I also trade options.
This is why $15K is peanuts...I've probably lost $15K or more during the last 3 months but I did not even feel them because I made so much more.