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Three For Three Trading Micron Options

|About: Micron Technology, Inc. (MU), Includes: COST, DIS, JNJ
Summary

Closed out my Micron Put Options Wed. Oct 10th.

Will be watching closely for a new position.

Its easy to lose everything on an Option Trade.

I have a very simple way of keeping score when it comes to investing, whether its shares or options.  I count a trade as a win or a loss, depending on whether or not I sold for a profit.  I know some will make a successful trade, putting say $1,000 in their pocket, but will turn around and consider it a failure if it later turns out that instead of $1,00 they could have made $5,000 or $10,000.

Oh well, when that happens, (and it has happened often) I just cry into the money I made.  It all goes back to my trading motto, inspired by my late great father:  "You will never go broke taking profits".

I've been chronicling my trading of (MU) Option Contracts here on my blog since Sept 11th as well as other option trades. Here's the first post:

Micron - Has The Smart Money Been Running For The Exits?

If you've followed my subsequent articles you know I went from puts to calls and back to puts again.  On the first two trades I made gains of about 50 and then 100%.  On the trade I just made today closing out my put options I made about 39%, not as good as the first two, but a win is a win.  I also did very well with some Disney Call options ahead of their earnings.

But all is not sunshine and rainbows, take note of that third bullet point about it being easy to lose everything on an option trade.  That happened with the Costco Call Options I bought just before they reported a "material weakness" that sent their PPS sharply lower  (COST).

So far I'm 4 out of 5 since beginning my earnest foray into the world of option trading, with a couple results still pending. I've blogged about most of them, enumerating my trades before and after.  There is one I haven't yet blogged about though, it was Thanksgiving Weekend here in Canada and I've been quite busy.  

On October 8th I bought 10 Call Contracts for (JNJ), they expire October 19th  with a strike price of $145 and cost me 36 cents.  Because each contract is for 100 shares the total cost was $330 before brokerage fees.  I am hopeful that JNJ will climb heading into earnings obviously.  Each contract obligates the seller (writer) of the contract to sell me 100 shares at $145 per share.  If JNJ were to climb to say $150 then the price of these calls that I paid 36 cents for would rise above $5 each, so long as it happens before they expire.  

As noted with my experience with Costco though, a bad news event could send the stock crashing and I could lose all the money I put at risk. 

I recognize that this is a bit of a brag post, so I might as well go ahead and tally it up.  

  • Sept 11 bought 10 MU Oct 5, $40 puts at  $1.34 each for an outlay of $1,340 USD.  Sept 12 sold those same 10 puts for $2.10 for a total of $2,110 USD.  Realized gain $770 USD less brokerage fees, about 50%.
  • Sept 12 bought 10 MU Sept 28 $45 calls at $1.06 for a total outlay of $1,060 USD.  Sept 19th sold those calls for $2.14 for a total of $2,140 USD.  Realized gain $1080 USD less brokerage fees, just over 100%.
  • Sept 21 bought 10 DIS Oct 19 $115 call options for 67 each for an outlay of $670 USD.  Sept 28th sold those same 10 calls for $2.65 for a total of $2650 USD.  Realized gain $1,980 USD less brokerage fees about 295%.
  • Sept 21 bought 20 Oct 19 $40 MU puts at 46 cents for an outlay of $920 USD.  Oc 10 sold those same puts for 64 cents for a total of $1,280 USD.   Realized gain of $360  USD, about 39%.
  • Oct 3rd bought 10 Oct 12 $247.50 COST calls at 33 cents for a total outlay of $330 USD.  Still holding but I'm going to count this as a total loss.  Realized loss $330 USD or 100%.
  • Oct 5th good money after bad probably, bought 10 Oct 19 $240 COST calls for 15 cents for an outlay of $150 USD.  I'll count this one as still pendinggiven that there's still time, but I don't hold out much hope here.
  • Oct 8 bought 10 Oct 19 $145 JNJ calls at 36 cents for total outlay of $360 USD.  This  one is still pending.

So gains of $770, $1080, $1,980 and $360 brings the total of profitable trades to $4,190 USD, take off the realized loss of  $330 and the total is $3,860.  Even if the second round of COST calls ends up expiring worthless costing me another $150 USD I'm still at $3,710 in profits.   

And the joy of being a Canuck, $3710 USD comes to about $4,800 CDN.  Of course there are trading costs, which in my case come in at about $25 USD when trading on the US side, so that's $50 to get in and out.  That's ~$300 USD I've enriched my discount broker by over the past month. 

Suffice to say, 'ca vaut la peine' as they say in French, it has been worth it. 

Commentary

As I've written before, I have traded options before this most recent spate of activity.  Its been about 3 years, but prior to this past month I merely dabbled, now I'm doing it far more frequently as you can see.

Why am I sharing my trading activity? 

One reason is that I enjoy writing, it helps me sort through my own thinking and keeps me focused. Another reason is that I know what a cesspool the public markets can be, especially public forums such as this, or StockTwits where I post with the username growacet.  Honesty is something I value, and I know I will not always be right in my trading opinions, but I can still give an honest and straightforward explanation of what I myself am doing and the reasons why. 

Sword play in stock based social media can be fun, most of the time that's the way I treat it.  I will trade barbs with bulls when I'm a bear or vice versa, its a fun diversion a lot of the time.  Sometimes I go over the top though, when I think someone is a lying manipulator "GET IN NOW AND GET RICH" or "THIS IS A SCAM, SELL BEFORE YOU LOSE IT ALL",  it gets under my skin and I'm not shy about responding in kind.

Micron is a great example of a stock and a company about which I'm somewhat bi-polar.  I've owned both puts and calls, which means I've alternated between being bullish and bearish.  Please understand that these are short term opinions, what I'm doing is generally called swing trading, riding the pops and drops.

In the broader sense my opinion of Micron is bearish, and it is my opinion that the larger trend will be downward for some time yet.  For how long?  I don't know quite frankly, I'll be watching for a bottom and the signal I believe will herald a true long entry point will come when I see daily volume hit around the 100 million mark.   This is my opinion, and as I frequently remark...my opinion could absolutely be wrong.

Sorry for the rambling post, if you bothered reading the whole thing I hope you found something useful to take away with you.  Comments are always welcome.

Disclosures

Finally, I wrote this blog posting myself and received no compensation for it whatsoever. These are my thoughts and opinions and as such they could very well turn out to be wrong. 

Long or short, Put or Call Options...investing comports significant risk. Input from a registered investment advisor is strongly suggested for anyone considering an investment in any stock.

Disclosure: I am/we are long JNJ CALLs COST calls.

Additional disclosure: You can find me in numerous forums where I use the names DrY (yahoo) growacet (stocktwits) ledrog (stockhouse), and avoidthebag on twitter