WalMart – $2600 in profits since Feb 10!

We are now up over $2600 since the low of our position around February 10, when WMT closed at $73.76. It’s stock price has moved up about $5 since then, and our ongoing position is making over $200 a week with a low-risk structure. Out Delta is kept near zero, today it is 10 (Beta Weighted to the DIA). Our daily time decay, or Theta, is $46 and the position consists of some short stock and a collection of short puts. The plan is to continue trading the position for income.

Currently, we are short 300 shares as a result of selling some uncovered calls earlier. We are going to work today, Friday the 25th, to sell some ITM puts that will close that short stock position. WalMart pays a dividend soon, and if we are short shares, we will pay that dividend. We want to avoid that situation at all times. It’s an unnecessary expense. We trade a good number of positions in dividend-paying symbols, so we always try to keep are awareness of X-dividend dates front and center. Occasionally, we do miss one and get to the X-Div date with a short stock position. When you allow that to happen, the dividend is deducted from your account and you pay it for the shares you are short. Think of it in the simplest of terms: If you own the stock, you get the dividend. If you are short the stock, you pay the dividend! Don’t let that happen.

We like to use the weekly options, but for beginners they can be difficult. Here is an example of a good way to use them: Today, Friday, we are hoping to close our 300 share short position so that we don’t pay the dividend on May 7. We will plan to try and end the day with at least 3 ITM puts so our short shares will be closed. On expiration Friday, it’s best to try and sell the options (expiring on that same day) early in the day. In the afternoon pricing has deteriorated, to the point where it’s usually not worth it.

Stay Optioned, My Friend!

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