Calculating Mid-Contract Put-Selling Trade Status + A New Covered Call Writing Strategy Coming Soon – December 19, 2022
After entering our put-selling trades, we can calculate the current status of our trades mid-contract with a few simple entries into our Trade Management Calculator. In this article, a real-life cash-secured put example with Bristol-Myers Squibb Comp. (NYSE: BMY) will be highlighted. Hypothetical examples of winning and losing trades will be detailed on the spreadsheet.
BMY initial trade details
- 7/5/2022: BMY trading at $76.84
- 7/5/2022: STO 1 x 7/22/2022 $75.00 OTM put at $0.78
- 7/12/2022: BMY trading at $80.00; $75.00 put option has an ask price of $0.20 (winning trade)
- 7/12/2022: BMY trading at $72.00; $75.00 call has an ask price of $3.20 (losing trade)
Initial trade entries and calculations
- Initial time-value return is 1.05%
- Annualized initial return is 21.31% based on an 18-day trade
- If exercised, BMY will be purchased at a 3.41% discount from the price when the put trade was initiated
Mid-contract status of winning and losing positions
When BMY moves to $80.00 (top rows)
- Net option gain of 0.78%
- Net cash profit of $58.00 per-contract
- Total % gain of 0.78% from 7/5/2022 to 7/12/2022
When BMY moves to $72.00 (bottom rows)
- Net option loss of 3.26%
- Total $ loss of $242.00
- Total % loss of 3.26% from 7/5/2022 to 7/12/2022
Important to note
- Be sure the mid-contract status calculations are deleted and final closing entries made to assess actual final contract calculations
- Mid-contract status calculations can be computed multiple times during the contract with no limitations
Discussion
The current status of our option-selling trades can easily be determined with a few simple entries into the BCI Trade Management Calculator. Based on these calculations, we can make decisions regarding the need for trade management implementation.
Author: Alan Ellman