The WHOLE trade in Whole Foods

For those of you that follow my Fab 5 basket of stocks, this is a position that I have on to once again give it a shot at the $100 Roll (entry on July 12). You also know that I am a big fan of using Option Collars on these positions (when feasible) and find myself in a position with this trade where the collar will be VERY important in protecting the overall trade.

Here is a summary:

  • Long the stock on July 12 at $93.20
  • Sold the stock today at $90.50 before it hits the trail stop (would have hit it)
  • Sold the August 100 Call at $1.85
  • Bought the August 95/90 Put Spread for $1.40

Today I had adjusted the trail stop on the long stock position to $90.20 with the thought that it may be able to hold the $90 level. This also sets the loss on the stock to $3. I sold early for a loss of $2.70.

Why did I sell early? One of the indicators that I use intraday is  Accumulation/Distribution and it was showing no signs of buyer interest. I sold the position before it hit the stop as I felt it would test the $90 level easily (and it has).

I have now began the process of planning my exit of the August option collar component. My current thinking is this:

  • I will monitor the short August 100 Call position closely with a stop at $.80
  • I am monitoring the value of the August 95 Put – currently at $6.50
  • The August 90 Put strike sits as the current price level so I am looking for a hold – would be ideal for me.

With the loss of $2.70 on the stock plus the $.45 credit collected on the collar I have a net loss of $2.25 to work towards covering.

I think it is very possible to be made whole in this trade and this just shows a great example of just how valuable a Collar can be – is there when you really need it.

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