August 8th, 2023
4 Winners in 4 Days
We’re off to a strong start in August in Options Income Weekly, closing four profitable trades in the first four days of the month and generating $210 in cash per one contract sold.
One of those trades was on a new name for Options Income Weekly members (although we have recently traded it successfully in the Income Masters program): digital sports entertainment and gambling company DraftKings (DKNG).
We took a gamble on the stock, selling a cash-secured put option on the day before the company was scheduled to announce earnings. Specifically, on Aug. 2, with DKNG trading at $30.06, we recommended selling the DKNG 18 Aug 24 Put for $0.24, or $24 per contract.
We acknowledged at the time that this was a bit riskier than our usual trade. But we felt comfortable with it given that the strike price was 20% out of the money (OTM) and that we would have a few weeks before expiration to manage the position.
After the closing bell on Aug. 3, the company reported an earnings surprise and raised its sales forecast. The next morning, shares ran up more than 10% and the premium on the put we sold fell to a nickel.
We told members to take the money and run, booking a $21 per-contract profit for a 0.9% return in just two days.
While fast closeouts like this are exciting (and something I plan to write more about in subsequent issues of Filthy Rich, Dirt Poor), the DKNG trade wasn’t even the highlight of our week.
That title goes to the three closeouts we made on semiconductor maker Advanced Micro Devices (AMD) in just one week as we traded around the company’s earnings report.
As I mentioned in a recent article, our first AMD trade was a longer-duration put that we sold with 45 days to expiration.
Specifically, on July 11, we recommended selling to open the AMD 25 Aug 99 Put for $2.55, or $255 per contract. That’s a larger chunk of cash than we usually pick up thanks in part to the greater time premium.
Also helping to elevate premiums was the fact that the expiration date fell after the company’s upcoming earnings announcement.
We noted at the time that we would look to exit the position once the premium fell to $1, ideally before the company reported earnings on Aug. 1 after the close.
After putting on the trade, AMD ran up to a high above $120 before turning lower and falling back toward the $110 level.
As we approached the company’s earnings announcement, the premium was holding steadily above our target exit price. Yet, we stuck to our guns, comforted by the fact that our put was well out of the money and that we would have a few more weeks to manage the position after the report if need be.
But on Aug. 1, the stock rallied ahead of the company’s report, and the premium on the put we sold dropped below our $1 target exit price to $0.95.
We recommended members buy back the put they sold, booking a profit of $1.60, or $160 per contract, for a 1.6% return in 21 days.
In the AMD chart below, the red arrows show where we entered and exited the trade.
The day after we exited our first trade, shares sold off following the release of the company’s second-quarter results. While revenue was down 18% from a year earlier to $5.36 billion, it was better than expected. And earnings of $0.58 per share beat by a penny. Yet, Wall Street seemed to take issue with the company’s guidance.
We decided to capitalize on the post-earnings volatility, selling an AMD 18 Aug 99 Put for $0.80, or $80 per contract that afternoon, and setting a target exit price of $0.30.
AMD bounced back the next morning and we hit our target exit price, booking a profit of $50 per contract for a 0.5% return in one day.
But we weren’t done yet! Later that day, we decided to enter ANOTHER trade on AMD, this time selling the AMD 18 Aug 104 Put for $0.90 and setting our target exit price at 50% of the max profit, or $0.45.
Shares continued to rally on Friday morning, and we hit our target exit price. We quickly closed the position, walking away with a $45 per-contract profit for a 0.4% return in less than 24 hours.
It was a whirlwind week of AMD trades as we repeatedly turned over our capital and booked profit after profit. It was also the first time we’ve closed three winning trades on the same stock in one week in the history of Options Income Weekly.
I don’t know about you, but I’m excited to see what the future holds for the service!
Trade Smart,
Emily Norris
Managing Editor, Traders Reserve
