Yesterday I thought about mentioning the fact that leaving the 73 call that at the time was no bid open left the possibilty that the stock could rally above that strike before today’s expiration and that call could be a lotto ticket. Well, the stock did just that. So we’re going to now sell that call at 8c to make sure we’re not long QCOM stock on Monday morning.
ACTION – Sold to close the QCOM (73.05) Nov22 73 call at 7c
If one was to forget that they were long those and the stock did close above 73, you can ask to not be assigned stock but you would obviously lose the worth of those in doing so and in general it’s a minor pain in the ass, so best to just sell those now. If it closes below 73 and you are still long these then you don’t have to do anything, but double check on your trading account to make sure they don’t screw that up.
Original trade and profit taking on other strikes below:
With QCOM’s analyst day come and gone, the stock is off its recent highs but not quite to the sweet spot of our weekly in-the-money fly (below). The idea for the trade was that the run-up into the event would leave investors slightly disappointed, and thus playing for a bit of a consolidation made sense on a near term basis. With expiration tomorrow and the stock basically a binary chance of going up or down from here, we’re going to take the profits on this trade and move on.
ACTION – QCOM ($71) Sold to close 1 Nov22nd 67 calls at 4.05, bought to close 2 Nov22 70 calls for 1.10 (2.20 total) for a 1.85 closing price and 60c profit (paid 1.25)
(note, the Nov 22nd 73 calls are no bid so they don’t need to be closed)
The stock is essentially in the same place from where we initiated this trade which shows you that the majority of the profits on this trade is from collecting the decay of the in-the-money fly.
Original Trade Nov 14th, 2013:
TRADE: QCOM ($71.25) Bought Nov 22nd (Next Friday) 67/70/73 Call Butterfly for 1.25
-Bought 1 Nov 22nd 67 Call for 4.40
-Sold 2 Nov 22nd 70 Calls at 1.75 each or 3.50 total
-Bought 1 Nov 22nd 73 Call for .35
Break-Even on Nov 22nd Expiration:
Profits: btwn 68.25 and 71.75 make up to 1.75, max gain of 1.75 at 70
Losses: btwn 67 and 68.25 lose up to 1.25, btwn 71.75 and 73 lose up to 1.25, max loss of 1.25 below 67 and above 73
Trade Rationale: This is basically drawing a line in the sand above where the stock is trading following its recent run, with the thought that any pullback from this level is not likely to be severe. The greatest risk to this structure is if the stock follows through to the upside into or on the heels of its analyst meeting.