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Closing Bear Call Spread against WYNN one week earlier for 13.79% profit

Today I was able to close my Bear Call Spread against WYNN for a profit. I put this trade on via newsletters on October 16, 2014 with expiration next week.

It was a bumpy road during last couple of weeks. I sold a 205/200 call spread and at some point when WYNN reported earnings, the stock jumped up almost to 200 level endangering the spread.

The jump was very quick however and as quick it was going up, it fell even faster down. Today, the stock continued further down making the spread worthless.

Although, I typically hold my trades until expiration, with this trade I decided to close it earlier. The reason for early closing is simple.

There is still a whole one week left until expiration. During that time many things may happen and the stock may sky rocket. A winning trade may quickly turn into a losing one.

The entire trade was worth 0.07 per contract when I was placing a closing order. I placed a closing order for 0.05 per contract. TD Ameritrade doesn’t charge commissions for such trades, so why not to take advantage of it and close it early.

And my last comment would be to my reasons for holding my trades until expiration while you may have heard many traders saying otherwise.

With a small account as mine I have no choice but to aim for a full premium. Many times my account allows me to take only one or two contracts with premiums around $30 – $150 per trade. Opening and closing a trade early would cause the commissions eating up all profits.

Once my account grows larger and I will be able to open a trade collecting a couple of thousands of dollars, for example $1,000 or $2,000 per trade, it will be OK for me to close a trade leaving me with $300 – $600 profit in the first case or $1,000 in the second case in order to protect profits more efficiently.

Today morning, I placed a closing order this morning to close the trade

BTC 1 WYNN Nov 2014 199 call
STC 1 WYNN Nov 2014 204 call

@ limit 0.05 GTC

The trade executed a few minutes ago. Originally, I collected $65 premium. Today, I paid $5 to close the trade (commissions excluded). That leaves me with a 13.79% profit (or $60 gain per contract).

I also had a few bear call spreads against SPX set to expire today, but those trades were in the money (ITM) and thus couldn’t expire worthless. I had to roll those trades farther away in time and to higher strikes. I will report those trades when they close, or you can subscribe to my newsletter to follow those trades with me.
 
 





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