How To Manage A Trade That's In Trouble - My Options Trade On TQQQ
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Let's take a look at my TQQQ trade. It currently has an open P/L of -$3,500. Let's direct this trade, and see what happens.
Here is what I've done with this trade so far:
- Sold a put with 150 strike price, received $66.
- I was assigned & had to buy 100 shares at $150 each. TQQQ is currently trading at $116.
- I sold a call against these shares for $2.10 ($210)
- Bought it back for $0.37 ($37). I've made a profit of $173.
- I sold a call for $0.45 ($45) & bought it back for $0.05 ($5) for a $40 profit.
- Total REALIZED profit is $279 in 15 days.
THEN TODAY:
- I sold another 2 Puts with a 100 strike price for $1.14 ($114), collected $228.
If TQQQ is below $100 at expiration, I will have to buy 200 more shares. This is a good thing and here is why.
Scenario 1: TQQQ stays above $100. I keep the $228 and my total realized profit goes up to $507.
Scenario 2: TQQQ is below $100 at expiration. I get assigned and have to buy another 200 shares. This is a good thing because:
- I would have bought 100 shares at $150.
- I would have bought 200 shares at $100.
-This lowers my cost basis because my new average price per share is now only $116.66 per share instead of $150 before getting assigned.
As soon as TQQQ moves above $116.66, I start making money on these shares. This is more likely to happen than TQQQ going back above $150 in the next few weeks.
So if scenario 1 happens, I just keep collecting premium, but if scenario 2 happens I also lower my cost basis.
So the truth about trading options is, a trade may look like it is in trouble, but really if you're following a solid trading strategy, it's probably going according to plan. If you do this, you will make money with options trading.
Referenced Videos:
The Options Wheel Strategy Playlist:
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