GOOG Time Decay Spread Look Back Trade

GOOG – 07/01/2016

GOOG was trading at $699.98 and I felt it was reaching the top of its range. I decided to place a variation of a Bear Call spread to take advantage of that as well as time decay. On 7/1 I sold the $735 Call for $0.15 and Bought the $745 Call for $0.50 to cover it. I wanted GOOG to move toward my $735 Call but not go over. I would then still have the $745 long Call to either sell for a profit or sell another Call against. Initially GOOG cooperated and my $730 Call expired worthless. Then, on 7/11, I sold the 7 week 3 $732.50 Call against my long $745 Call and brought in another $0.35 in premium which put me at break even if the $732.50 expired worthless. I could then sell my $745 or convert to a true Bear Call spread for July week 4 expiration.

On 7/12 GOOG started to shoot up toward my $732.50 short position. I decided to defend it by purchasing the July week 3 $725 call for $2.25 which moved my break even up to $740 if the stock continued up. The next day, 7/13, GOOG appeared to be moving down again so I sold the call I had purchased the day before for what I paid for it, $2.25. I had decided that I moved too fast to defend the position on 7/12 and was glad to close the $725 for what I paid minus commissions.

Because I had to defend and GOOG was still too close to my short position for comfort I tried to close the position on 7/15 for $0.40 but was not able to do so. My $732.50 expired worthless which was good, but I did not feel confident enough to sell another position. I wanted to exit. I waited until 7/18, the week my long $745 would expire and decided to sell for whatever I could get before time decay ate away too much of my premium on the $745’s. I could have waited and hope GOOG shot up to that level in the next day or so but decided to play it safe. I was able to close my $745 at $0.20 and $0.25.

In the end I had risked about $3,118.60 and walked away with $9.39 or .301% on 17 days. Even annualized that was only 6.46%. But, this trade did not go as I as it could have considering I had to defend it at one point. Really, I was glad to walk away with anything. This does show that you can still not lose money even if things do not go as expected with options; at least sometimes. Sometimes I do lose money.

Date

Symb

Action

Exp

Strike

Price

Cont

Type

Cost

Balance

07/01/16

GOOG

BTO

7WK4

745

-$0.50

3

Call

-$156.80

-$156.80

07/01/16

GOOG

STO

7WK2

735

$0.15

3

Call

$38.20

-$118.60

07/11/16

GOOG

STO

7WK3

732.5

$0.35

3

Call

$93.72

-$24.88

07/12/16

GOOG

BTO

7WK3

725

-$2.25

1

Call

-$234.72

-$259.60

07/13/16

GOOG

STC

7WK3

725

$2.25

1

Call

$215.27

-$44.33

07/18/16

GOOG

STC

7WK4

745

$0.20

2

Call

$29.49

-$14.84

07/18/16

GOOG

STC

7WK4

745

$0.25

1

Call

$24.23

$9.39

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