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Profiting on Two Early Close-Outs Paul Price- Market Shadows

Made Two Moves in the Put Writing Portfolio

We closed out our Cummins (CMI) January 2014 $110 put four months early. The stock had risen to above $135 allowing us to capture 87% of the potential profit while eliminating 100% of the risk.

CMI was $113.45 when we first started that trade. We made a nice profit without ever breaking a sweat on this trade.

CMI put close-out

We sold the put on March 22, 2013 for $11.00 per share. We closed today for $1.40. Our $960 profit will now be reflected in the closed-out section of the Virtual Put Selling Portfolio.

A few days after selling the Cummins put we had initiated a January 2104 $87.50 strike price put on agricultural equipment company Deere (DE).  DE was trading at $87.28 back on our March 25, 2013 inception date. It was slightly lower at $85.14 a few minutes after midday.

DE  put roll-out

I still like Deere to ultimately reach or exceed our target. We rolled out our put from this coming January to the same month with the identical $87.50 strike price in 2015. That locked in a small gain on the old option while bringing in a large enough premium on the 2015 series to provide a nice cash infusion.

We paid $5.80 per share ($580 for the contract) to cancel out the exiting short position. We collected $11.75 per share ($1,175 for the contract) on the newly sold $87.50 put. The net credit was $595.

That leaves plenty of time to see Deere reach our target.  We now have more to gain than we did had we merely stayed with the original trade.

Ah, the the beauty of being an option seller. The stock is lower than it was on the date we started yet we booked a $235 gain on the close-out anyway.

The 2014 transaction will now be recorded in the closed-out section while the 2015 version will go onto our list of open positions. Our break-even on the new put is now $75.75 (the $87.50 strike price – the $11.75 premium received).

See full details of all our option sales here put-selling-virtual-portfolio/

The opinions expressed are those of Market Shadows and the author, not those of the Wall Street Examiner. The Wall Street Examiner provides market commentary content for Market Shadows without compensation at this time but with the expectation of possible future consideration. The Wall Street Examiner does not participate in stock or options selection or strategy recommendations for Market Shadows and makes no representation regarding the accuracy or validity of the ideas expressed in the post. No recommendation or endorsement is intended or implied. This post is presented for informational purposes. Do all necessary due diligence before considering any investment.

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