Saving some Mental Capital in Lululemon

With many things in life, the more a person frets over a situation that is causing angst the more it can affect other parts of their life. This mental drain is not healthy and so it is important to avoid being in this state as much as possible.

With traders this is especially true in that so much is on-the-line when trading. With real money involved, emotions can get the best of a person – and can likely lead to more mistakes (or digging a bigger hole). We all want to avoid that for sure.

I am no exception to this. I found myself doing a LOT of work to manage a position in $LULU (from an earnings trade) and so I took a step back to assess the “goal” of the trade:

To keep the premium collected from being short the July 60 Put option, sold for $2 on June 6.

In order to deal with the Risk Management part of this trade, the plan has been to buy the Weekly 60 Put for $LULU each week – and I have done just that. However, this task of “protecting” the above premium has resulted in a tremendous amount of work monitoring the option chain each week looking for opportune moments to purchase the puts. So far this is what I have accomplished:

BtO June 22w 60 Put for .05; expired worthless BtO June 29w 60 Put for .15 on 6/26 StC June 29w 60 Put for 2.15 on 6/28

With this profit from selling the weekly put this week, it allowed me to consider closing the initial trade entirely. Why would I consider doing this? For one, I have 3 more weeks to July expiration so I have to protect the short puts until then. This means I have to buy puts to protect the initial position at least two more times – thus eating into the premium collected. Secondly, and more importantly, I have the ability to close theĀ  trade entirely with a decent gain – AND save the Mental Capital for other trades that requires a lot less work.

Whew, I feel better already. Done.

2 thoughts on “Saving some Mental Capital in Lululemon

  1. Let me see if i understand this correctly,

    Did you essentially buy the put back for more than the original premium (for a loss), and the profit from selling the weekly puts you bought gives you an overall gain?

    I’m still learning options, just want to make sure i am reading your logic correctly.

  2. Was not short a Put. I was long stock, and short the call against. with that premium, I bought the put. This creates the Collar.
    After selling the stock when the stop hit, I then evaluated when I wanted to sell the Put – for the most gain possible.
    Now I am only short the 77.5 Call

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