How was your weekend? I had a jampacked weekend, with a talk for “Mother’s Day” that I planned to do next Sunday but was told it has to be done that Sunday (yesterday). I also had to make good on my new routine for brisk walking (which I dropped on Saturday in favor of some basketball action with my little athletes. Then also had conference call with Marzena the proponent oof Qatar’s Women Investing in Stockmarket Programme – big things happening there and will tell you more later! I did manage to tick activities I wanted to do, organizing for this week, 7 hours sleep a day, scored extra publicity — tired but happy except that I didn’t get to paint my nails! 🙂 Anyway, it was a good thing I had a packed weekend because I can’t wait for Monday!
OK recap : last Friday, Oil fell below $100 and the stock I am holding STO followed down, with my existing trade a covered call ending at 15c. (Read about the start here). I opened the transaction selling it at 46c and that already has a good profit in it. The Middle East and US market shaved off more $$ from the Oil price and STO share price moved along, down at least 68 point as of noon. That’s when I closed my call at 4c, for a 42cents profit.
I am so delighted with this result, if we are to measure trading performance, let’s say for this trade I risked 10c – so that’s my 1R (R stands for Risk), the resulting profit is 4.2R (not counting expenses). That’s welll above my target for this trade where I expected to make 3R.
But actually, because my strategy is a combination of holding stock and trading the Options, my risk on the option trade is zero — don’t you agree? I got paid first (the 46c premium) and think, that tidy amount multiplied with the amount of shares I am holding is sitting in my cash account earning interest. Then today, I closed out the transaction buying back the option at 4c. I made money from the existing capital, and I am free to again sell another call option, which I did (STORQ7) !
STOV97 – 14.00 CALL expiring May 2012
Sell to Open 46c
Buy to Close 4c
Profit 42c excl fees
So from my original capital, I made money from zero risk which is called a return of infinity! Get your calculator out, type in .42/0. Come on, try it on your calculator and it will go crazy!
Below is an exaggeration… but sooo cool!
