So that happened. I was selling puts on FIT & I got assigned aka, the price of the stock settled below the put I sold at expiration. I was obligated to purchase 100 shares of FIT at the strike price I had sold.
Let’s recap my trading strategy. I planned to sell FIT puts until I got assigned and then sell calls….so everything is going according to plan right??? Well not exactly…
I sold a 45 strike put back when FIT was trading up around $50. Ugh. That seems like soooo long ago. Then I think we all know what happened to the market. China started devaluing their currency. The fed didn’t raise rates and the market got mad at Janet. There’s been a lot of volatility. When FIT dropped as low as $31.88, I started exploring the stock repair strategy. This sitch is like I bought some really chic Gucci boots and wore them once and then they went on sale. Of course I wish I had gotten in FIT on the dip. I am learning right?
I still remain longish term bullish on FIT. Apparently so do the analysts. FIT got some positive coverage and popped on that coverage a few weeks back, which enabled me to sell a call. Selling a call – what does that mean? I will explain it, but you could also watch this video hosted by my one of my trading mentors & he will explain it with some visuals. Funny thing is, now sometimes I mentor him. But that’s a story for another time…perhaps he will share it on the blog…Peter?
Anywho. Like I said, I am the proud owner of 100 shares of FIT which I got long at $45 a share, so $4500. Stay cool Holly. So I’ve sold a call. The tricky thing here is with FIT trading in a $35 range, there’s not much premium in the 45 strike calls or even the strikes above. There’s always that what-if right? What if I sold 40 strike call and then FIT busted through $40? Then I’d have to sell my 100 shares for $4000 and lose $500. Of course I look at the deltas to see what the probability is that the stock will move to that strike. It didn’t make sense to me to risk $500 or so to maybe make $50. So I have to wait for FIT & the market to have good days. The day I sold the call, FIT was having a good day, but there wasn’t premium at a higher up strike until I got to the traditional Oct expiration – that’s today as I’m writing this. The next day the Fed was going to make a statement and I thought the market might sell off so I got pumped to put that position on. Well the next day market & FIT rallied. The call I sold was worth about $1.50 more the next day. I was miserable about it. Also I sold a 44… I kept thinking, what if FIT busts through $44, then I am losing $100 when I could have made a profit on the sale of the stock. I am learning right?
What’s my big plan?
I am not married to my long position. I like to say, the stock is not my boyfriend, I am totally willing to dump this position for a better position. I want to own it for less. If FIT stays in this $37 range, I can sell 46 or 47 strike calls, that way, if FIT makes a big swing to the upside, I can exit the long position for a profit on the sale of the stock, plus the premium I’m collecting selling the calls. Then… I start selling puts again. Important for me to note, it’s earnings season. I will trade cautiously around FITs earnings, as that’s when I got assigned…on FITs Q2 earnings. Seller BEWARE!
The market just closed and I got to keep the premium from the 44 strike Oct call I sold. Stay tuned as I keep selling calls!
Post written by Holly Goodhart, Director, CBOETV