Closed NUGT covered put (7/8 expiration, $167.50 strike)

action

Bought to close a covered put position originally entered on 7/6. It consisted of 100 shares of NUGT, bought back for $165.89 (originally sold short for $167.05), and 1 put contract with $167.50 strike price, expiring 7/8, bought back for $2.87 (originally sold short for $8.90). Total return after commission for the combined covered put position was $685.70, or $6.86/share.

rationale

This position was originally detailed, here. After falling hard, yesterday, NUGT was gaining strength during today’s afternoon session, reaching a high of $168.90, before falling back to close at $166.68. I gave up about $100 in profit potential by closing this a couple of hours early, but that amount didn’t justify the risk of staying in the trade.

Despite the unexpected wobble at the end, I am really happy with this trade. The risk was very well controlled, and the reward significant. After commissions, I collected more than 4% on the initial stake in just two days. Of the $6.86/share gain, only $1.16 came from the stock side, the remainder was contributed by time decay and volatility collapse. So, the keys to this trade were the following:

This is definitely a pattern to keep on the radar.

July 8, 2016 at 4:30pm · NUGT · buy to close · covered put · options


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