by Das Brain
Right before I went on my short vacation to Miami, Florida I bought and sold some Corning NYSE:GLW call option contracts. This was done in the span of a week and was mainly done as an experiment to see if it was possible for me to take advantage of weekly or bi-weekly swings in share price of a stock. I have in the past made big profit from options trading selling after 5-6 months, but within a week or two is something else.
The net result of my experiment was $20 USD profit and the experience and knowledge that this is something I could do to make a little money here and there. I know $20 doesn’t sound like much but the experiment was only done with 2 call option contracts. I am starting small, next time I can play with more contracts, hence larger profits and remember a profitable trade is a good trade (better than loss). I already know that this type of swing trading of option contracts has been done by professional trading houses, but I needed to do, act and experience a profitable trade to know that this is possible for me.
Before I describe the actual trade, I am going to briefly describe what swing trading is. It is different than day trading, where you buy and sell a stock or option intraday or the same day. Swing trading is when you buy a stock or option, to sell it within a few days or weeks, it is less hectic than day trading but just as difficult to find opportunities. On this swing trade I bought Corning 2 call options for Jan 08 with a strike price of $20 for a premium or contract price of $4.60 (remember 1 option contract represents 100 shares) so $460 X 2 is a total of $920. After a 4 days I found an opportunity to sell the same 2 call options of Corning for $5.00, so a total of $1000. The profit is calculated as follows:
$1000 – $920 = $80 – ($30 buy comm + $30 sell comm = $60) = $20 USD.
The hardest part was finding the precise entry point, thankfully using the real-time candle charts and level II stock and option quotes really helped. It gave me a better feel of when the right time and right price is, so as not to overpay for the Call option contracts.
As mentioned earlier, I only bought 2 contracts. This is something that I will continue doing for the next few weeks to get a feel or process or technique. Once I am truly comfortable, then I will be stepping it up to 3 or 4 contracts and also opening up more than one position. Currenlty, I am still getting use to the new OptionsXpress platform I signed up for.
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