Hmmmm… not really. I sold a call option on XPO for 1$ and bought it back for 6.75$. At first glance it looks like i made that loss of 575$.
But – i not only bought that option back. I rolled it out. That means i sold another call. One month in the future. For 7.1$. Strike: 95$.
So what can happen on expiration date? 1. XPO is above 95$. I receive 710$ and 100 XPO shares are sold for 95$. (The shares were booked to me through a sold put for 90$ so i would have an additional profit of 500$) 2. XPO is below 95$. I receive 710$ and 100 XPO shares stay in my account.
Definitely i would have a minimum profit of 135$ (710-575).
Reason: Why this one? When you look at the chart at the day i sold the Put Option it looks to me like XPO is forming a bottom. The second reason was that XPO was about to join the S&P Midcap 400 Index. It´s often the case that when a company joins an index, it will rise the next weeks/months.
1st Option: Sold 1 XPO Apr18´19 45 Put. That means i sold a Put Option to someone which ends on 18th April 2019 at a 45$ Strike. (Mr. Someone has the right to sell 100 XPO stocks for 45$ on 18th April to me. I have the obligation to buy it from him. This makes only sense if the price on 18th April is below 45$). More than 10 % lower than the price of the stock on this day. Entered the trade on 11th March 2019 for 1$. Bought the Option back on 1st April 2019 for 0.1$.
2nd Option: Sold 1 XPO May17´19 47.5 Put for 1.05$. Entered the trade on 1st April 2019. Bought it back on 2nd May 2019 for 0.1$.
3rd Option: Sold 1 XPO Jun21´19 55 Put for 1$. Entered the trade on 2nd May 2019. Rolled the option out. So i bought it back with a loss and sold another Put with a lower strike and a further-dated expiration.
4th Option: Sold 1 XPO Jul19´19 52.5 Put for 3.6$. Entered the trade on 28th May 2019. Bought it back on 16th July for 5 cents.
5th Option: Sold it not immediately after i bought the fourth option back because of earnings on 1st August. One day after earnings (2nd August 2019) i sold 1 XPO Sep20´19 60 Put for 1.1$. Bought it back on 5th September for 22 cents.
6th Option: Sold 1 XPO Oct18´19 62.5 Put for 1.1$. Bought it back on 10th October for 22 cents.
7th Option: Sold 1 XPO Nov15´19 62.5 Put for 1.45$. Bought it back only 15 days later for 30 cents.
8th Option: Earnings on monday (28th October) after market close. Probably i´ll sell another put on Tuesday. Sold it on 1st November for 1.15$. Bought it back for 22 cent.
9th Option: Sold 1 XPO Dec20´19 77.5 Put for 0.7$. Bought it back for 0.14$.
10th Option: Sold 1 XPO Jan17´20 72.5 Put for 0.8$. Bought it back for 0.15$.
11th Option: Sold 1 XPO Feb21´20 70 Put for 1.05$. Bought it back for 0.2$ only 7 days later.
12th Option: Waiting for 2 reasons: 1: Earnings in a few days. 2: Danger of slowdown because of the Coronavirus. Sold 1 XPO Mar20´85 Put for 1.1$. Bought it back for 0.22$ 8 days later.
13th Option: Sold 1 XPO Mar20´20 90 Put for 0.75. This time the option got assigned and i´ve now 100 stocks in my portfolio. The premium i kept, of course.
14th Option: Now that i have the stocks in my portfolio, i can sell calls against it. Sold 1 XPO Jun19´20 90 Call for 1.4. Bought it back for 0.3.
15th Option: Sold 1 XPO Aug21´20 90 Call for 2.1. Bought it back for 0.2.
16th Option: Sold 1 XPO Sep18´20 92.5 Call for 2.35. Bought it back for 0.3.
17th Option: Sold 1 XPO Oct16´20 95 Call for 1.95. Bought it back for 0.3.
18th Option: Sold 1 XPO Oct16´20 90 Call for 1. Rolled the option out. That means i bought it back for 6.75$
19th Option: Sold 1 XPO Nov20´20 95 Call for 7.1. Expired worthless.
On 5th March i sold a put option on V.F. Corporation (VFC) for 1.05 $. 40 days later i had to buy it back for 5.25 $. That was a loss of 420 $. Well, in hindsight March was not the perfect time to sell this option but none of us have a crystal ball.
Now one can accept the loss or figure something out. I did the second.
So i again sold a put with a lower strike for 5.15 $. But VFC was not nice, the price has fallen further – and i had to buy it back for 5.9 $. Again a loss – this time 75 $.
Once again i sold a put with a lower strike. This time for 5.2 $. Today i bought it back for 0.1 $. That was a 510 $ win.
What i mean in this article is that if you choose a good stock, even if it temporarily goes down, in the end you will mostly reduce your initial loss by rolling your options forward and down.