Another new position, this time Heineken. Also a bit different this time it’s a written call option instead of a put option. Which means I am bound too deliver the shares at the strike price up until the expiration date. There are two ways to go about this. Covered and uncovered , when you write a covered option this can be done when you have the shares in your possession. You expect the shareprice to stay more or less the same or go down and the option premium is a bit of an extra result on your stock position. You are covered by the fact you own the right amount of the stock. This can also work against you, when the share rises above the strike price effectively limiting your profits, which will be strike price plus option premium.
This is the easy way of covering, there are other ways , but those are for another post and another time.
Leaves us with the second variation, writing uncovered calls. Which means you don’t own the right amount of stock and you gamble om a downturn in the share price. Your potential loss is infinite as the share price can rise well above your strike price and when called upon too deliver , you will have too buy at market price.
You do have the option to buy the option back at any given time. So before you do anything be well aware of the risk and your risk appetite.
That’s the theory behind it in a nutshell, back to the position itself. Heineken’s share price rose above 100 Euro’s last week, at that time it got me thinking the valuation seems a bit high at the moment. The last jump up was also quite significant. Nonetheless Heineken remains a very solid company with great dividend history, worth having in any portfolio.
So I took a bit of a gamble and sold a Call option, strike price 100 euro, expiration date 15 December 2023. At 12,50. And I have set a goal buying the option back at 9,25. Let’s see how this works out.
New series, as I stated in my option article newsflash post. I am going to mix it up. Talking about positions I take and why I take them. These posts are by no means advice , and should not be taken as such. It’s merely me taking you through my thought proces. Do your own homework and risk assessment at all times before doing anything !
ASML is a leading company in chip machines. Which is a highly cyclical business. It’s also one that is highly complicated and very expensive too enter. Hence when your at the top changes are you will be there for a while.
ASML has been one of my favorites for a lot of years now. I have bought the stock at first and as volatility is common I started writing put options. This time things are no different. Given the global trade war and attack on Chinese technology by the American president these are trying times. But in the long run this is only a minor hick up. As everything nowadays is technology driven it’s only a matter of time before things get back too business as usual. With these sort of ‘cyclical’ stocks the price fluctuations are always a bit over the top. Which has it’s direct influence on the option prices.
As I am long in any stock I own, I have written (sold) a put option for december 2022 with a strike price of 140 euro’s per share at a price of 19,05. Which means I received 1905 euro’s for taking te risk of having too buy 100 shares at 140 euro each. Why 1905 when the price states 19,05 ? Well 1 option contact always has the underlying number of 100 shares. So option prices should always be multiplied by 100.
I will sell this when it hits 25% profit, which means buying the option when the option price hits 14,27 (Rounded and including all transaction costs).
Why 25% ? , well what I have done is checking my historic options trading profit percentages and they on average run around the 25% mark. Which means that is psychological my comfort zone. I am not really good at letting my profits run, also these profits tend too be made in shorter time periods than my larger profits. Mostly in a matter of days instead of months. So my conclusion is I am a bit impatient and therefore this is my threshold for now.
Not very scientific maybe, bit then again it’s what I tend to do. So in order not too make things overly complicated I simply put the order in and don’t check it anymore.
First post on options and trading options new style. Will be interested too hear your thoughts and comments.
I will be making more of these as I am opening and closing positions, hopefully you will find my thought process interesting !
A short note on my options trading. This month I also took some option positions and this time a bit farther away into the future. Since I have time and no rush. In the meantime I am learning and reading up on options. This is a very slow process for me so no new part in the ‘what are options’ series. It’s a work in progress.
I also noticed my options table is a far cry from readable on smaller screens, and less bigger ones. So I am currently in the process of making this table more readable and understandable as well. Maybe it’s needs to be in a totally different format. I am aiming to get this in order with the next update.
Strategy wise nothing has really changed. I only incorporated a part of my savings as a buffer, which is more a state of mind really than anything else. I have not yet need to transfer any money from my savings into my investment account. I have added 1/3 of my savings towards my options portfolio , just in case.
I know this is more of an active approach towards portfolio management and something I don’t do with the vast majority of my portfolio. But this has turned out into a nice hobby and one I can do at my own pace , when I feel good and are up for it. All qualities in an activity which I need.
So for next time I hope having my new overview sorted. I a way people understand it and it’s readable. Until next time !
This year I am planning on learning more about options. In another series on this blog I keep track of my knowledge and in this series I will share my option positions. Mainly because a lot of information is about the theory behind options and calculation examples. Apparently not many actually share the practical side of things, the doing part.
And although theory and calculations are the basis behind it all, it all tends too favor the profit side of things. A lot of examples explain in detail where the profit in the position comes from. The part about the losses and risks is generally just a sentence long. Also the supposed profit margins are always pretty fat. While I enjoy reading about theory and supposed succes. I feel like I am learning a lot more when I am reading about mistakes. And how people adjust and learn from them.
With that in mind I am logging all my option positions each month and what happend with them. The strategy is basic , I am only writing covered calls and puts. I am writing puts on stocks I am planning on buying anyway and write calls on stocks I have in my portfolio. No complicated scenarios as of yet.
It’s a bit of an experiment and I will probably adjust the format of this article series in the future but for now I will make due with this table.
|Date position open||Option ||Quantity||Price||Total amount||Buy / Sell ||End date||Transaction costs|
|03-01-2019||Ahold Delhaize Put 19.00 18 January 2019||1||4,00||4,00||Sell||18-01-2019||0,85||Closed||3,15
|18-12-2108||Bam Put 2.20 18 January 2019||1||5,00||5,00||Sell||18-01-2019||0,85||Closed||4,15
|5-12-2018||Philips Put 29.00 18 January 2019 ||1||13,00||13,00||Sell||18-01-2019||0,85||Closed||12,15
|04-01-2019||Aegon Call 4,50 15 March 2019||2||10,00||20,00||Sell||15-03-2019||1,7||Open||
|07-01-2019||BAM Call 3,00 15 March 2019||2||10,00||20,00||Sell||15-03-2019||1,7||Open||
|22-01-2019||Philips Put 24,00 15 March 2019||1||7,00||7,00||Sell||15-03-2019||0,85||Open||
|30-01-2019||Philips Put 30,00 15 March 2019||1||20,00||20,00||Sell||15-03-2019||0,85||Open||