I exercised my first option yesterday. I had been long a JAN11 (MET) 12.50/30 call spread since March 09' and the BxA has been so wide that you can't close out the spread without giving up a lot of edge. I've had an order in at the middle for weeks and it never gets filled. So instead of leaving profit on the table when it's more than $10 ITM, I decided to get long the stock and receive the .75 dividend coming. Date of record is in late October. I now have an ITM covered call. My hope is that I get exercised in October because the person holding the long 30 strike will want the dividend. If this happens then I get out at 100% of the possible profit about 2.5 months before Jan OPEX. If I don't get exercised, then I pick up .75 on 1500 shares. If I can close out at that time for .75 or less then in effect I got the max spread as well.
Many of you have been reading this blog may have noticed that my blogging frequency has increased over the past few weeks as I got short the market. As you can imagine I am down money since getting short the market, this is the time when most people pull away from posting. But my goal is to stay active and involved and show you that trading is not always rainbows and butterflies. It is times like these that the things I have been sharing over the past couple of weeks are so important. You need to trade small relative to your account. I have a decent short position in the market and my portfolios are set up to make some awesome returns if we finally turn lower. But something I would like to point out is that my account is 70% Cash. I learned a long time ago how important it is to live by the rules you preach. Because of my discipline I am able to continue to hold my positions, I have time and capital on my side. I can't stress enough how important it is not to get to big....
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