As February gets under way, it’s time to review positions with February options that remain open (haven’t already hit profit targets or been stopped out).

Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.

February positions closed at profit target: $GDX (1/16)

February positions closed at a loss: $SLB (8/13), $LGIH (11/6), $MDT (10/23)

Remaining Open Positions (in order of entry):

• $DHI Long Feb 55 calls: We entered this position in August at $1.60 per contract. We sold half of our position at $3.20 on October 17th. We’re still holding our remaining position and the calls are currently in-the-money. The level I’m currently watching is 58.50. If $DHI closes below that level, I’ll close my position and whatever I get for those calls represents our total profit in the trade. If we hold these levels, I’ll next look to raise my stop loss level if/when $DHI breaks out to further new highs (above 61.77).
• $ABT Long Feb 90 calls: We entered this position in October at $1.20 per contract. We sold half of our position at $2.40 on January 22nd. Our timing on that exit was fortuitous as that date currently marks the high for the move. Unfortunately, our remaining calls are now out-of-the-money and theta is now our enemy. We’re closing out these calls here (currently bid 45 cents) and whatever we get represents our total profits in this trade.

If anybody has any questions, hit me here.

~ @chicagosean

Wow.

What a run we’re having in our Long May 100-strike calls in $BYND purchased on December 20th for $4.00 when the stock was trading below $77/share.

I wish I could say this was a regular occurrence, but of course we know this isn’t true. However, this I know with absolute certainty: stepping up to the plate and taking our swings in trades with proper reward-to-risk setups, appropriate position size, and a plan for risk management again and again allows us to “get lucky” every once in a while. And sometimes it only takes one or two trades to make your month or your year. This $BYND trade certainly has a solid chance to become one of those year-makers.

Back to luck, there’s a big difference between true “luck” like winning the lottery, and manufacturing your own luck through Best Practices. Which luck would you rather have?

I’ve been contacted a bunch by people who followed us into this trade and the general feeling I get from people is that they are scared — scared of letting these enormous open profits get taken away by the evil Mr. Market. [Read more…]