Profiting From Options Trading

¶ … Trades

For AAPL, on June 20th, 2016, I sold 50 Jun17 90.00 -- to open for a total of $59,750. On, July 6, 2016, I bought them back to close at 11.55 for a total of $57,750 -- for a total gain of $2,000 minus $65 for commissions/fees.

For MSFT, on the same dates, I bought 200 Jun17 50 calls at 4.70 to open for a total of $94,000 and sold to close 200 Jun17 50 calls at 5.15 for a total of $103,000.00. Total gains on this trade were $9,000 minus $228 in commissions/fees.

For CHK, on the same dates, I sold 300 Jan17 4.50 calls at 1.15 for a total of $34,500 and bought to close 300 Jan17 calls at 1.03 for a total of $30,900. Total gains on this trade were $3,400 minus $335 in commissions/fees.

For XOM, on the same dates, I bought 200 Jun17 92.50 calls at 5.15 for a total of $103,000 and sold to close 200 Jun17 92.50 calls at 6.30 for a total of $126,000. Total gains on this trade were $23,000 minus $128 in commissions/fees. This was by far my most profitable trade.

Total gain for the four trades amounted $37,400 minus fees/commissions, which totaled $756.

Each trade was thus a successful trade and net gains were positive for a successful three weeks.

Gains minus fees equaled $36,644 in the positive.

Discussion of the Performance

The performance I experienced occurred because the underlying of each option moved in the direction that I anticipated.

My initial hypothesis for AAPL was that it had peaked as a company, sales were declining and the overall outlook for the company was turning bearish, based on the research I did into the company's performance in China, its stagnating developments, and its lack of leadership (Cook vs. Jobs leaves much to be desired). The stock was entering into a reversal chart pattern after having reached new highs in earlier months and with the overall economy souring, I surmised that AAPL was due for a retreat. Thus I sold it short by selling 50 Jun17 90 calls at 11.95, and bought back on the dip of the underlying three weeks later at 11.55, which resulted in a gain of $2,000 minus fees. Had I shorted more options, the gain would have been higher, but I wanted to play it safe in case my hypothesis was incorrect and the stock rebounded. Fortunately, Brexit occurred and markets everywhere became very uncertain, which allowed me to capitalize on a dip in the stock (Yan, Petroff).

My hypothesis for MSFT was that due to recent acquisitions and partnerships (one for example that would bring the company into the marijuana sector) the stock was due for a boost (Popper). Thus, I purchased calls with the expectation of selling them at a higher price and this is what I was able to do. The stock had a modest pop from $50 to $52 pre-Brexit, fell post-Brexit before rebounding towards pre-Brexit highs, whereupon I sold for a profit. Thus I took a long position by buying 200 Jun17 50 (in-the-money) calls at 4.70 and selling them to close at 5.15 for a profit of $9,000.

My hypothesis for CHK was that it would continue in its downward trend due to economic pressures from low oil prices. The energy sector had been hit hard by the fall in crude over the past months and companies like Chesapeake were not situated to handle it well. CHK's debt is a crushing obstacle to any solid recovery in the underlying, so I expected the bears to continue to weigh heavily on the stock. Thus, I took a modest short position by selling 300 Jan17 4.50 calls at 1.15, which I bought back to close at 1.03 for a profit of $3,400.

My hypothesis for XOM also proved correct as recent news about the company's possible partnership with China gave the stock a pop. Thus I went long by buying 200 Jun17 92.50 calls at 5.15 and selling at 6.30 for a total profit of $23,000. Thus, the bullish sentiment for XOM paid off.