Anatomy of a trade starring Green Mountain Coffee Roasters

I often get questions regarding certain steps that I take in exiting an option position that are hard to answer in a twitter message. Sometimes the questions pertain to time-frame, or “why did you do that, why not do this” so I find it easier to do Blog post where I can lay it all out.

A heavily followed stock is $GMCR so my current trade has generated a lot of questions surrounding what I have been doing the past 2 days on the option side. Here is a summary of the initial entry:

  • L stock at 33.85 in after hours on 11/27/2012 (earnings report day)

I sold 1/2 of the position on 11/28 for $36 for a profit of $2.15 per share. Once I see a stock stall, and I did in this case, I like to at least sell Calls against the position to give myself a cushion for any downside move. I did just that with this trade:

As price churned yesterday, I elected to move up the strike to give the position a little more room:

I came in today with a plan to address the 4 positions that have weekly options (including this position). After some review today, I elected to sell the long stock position and manage this short Call into the close. The $.69 in premium gives me a lot of room to do so and is worth the effort.

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