Does This Market Have You Locking In Profits Early, Too?

Last Week's Income Report: June 6th, 2022

Does This Market Have You Locking In Profits Early, Too?

After booking seven winners last month and $263 in cash, we’ve closed two trades so far in June.

Both of these trades were early closeouts, but we exited the positions for different reasons. 

We began trading the airline stocks again in Options Income Blueprint in April. This followed a two-year hiatus as the travel sector was decimated by the coronavirus pandemic. 

But this year, airlines are benefitting from a surge in demand. Customers seem willing to pay higher and higher prices for tickets, with the consumer price index for airline tickets up 25% over the past year. That far outpaces the roughly 8% increase in the Consumer Price Index (CPI) over the same period. 

Because airline stocks are volatile, I cautioned members that we would only be trading them opportunistically at this point, rather than looking to be caught up in any of the positions long term. Therefore, I am willing to close trades early for a smaller-than-usual profit or even at breakeven if necessary. 

Including last week’s UAL trade, we’ve closed five successful positions on airline stocks – two on UAL and three on Delta Air Lines (DAL) – earning a combined $76 in cash. Our annualized rates of return on these positions ranged from 7% to 104%.

With the latest trade, our annualized return of 11% was below our 26% target rate of return. In a different market, we might have rolled the position out a week in an attempt to capture more income. But, as they say, no one ever went broke taking a profit. 

With Starbucks, my decision to close early was motivated by two factors. The first was the fact that we could exit with a 38% return, which easily exceeded our 26% annualized return goal. The second reason was that I didn’t trust the market rally.

I still don’t. And with a Federal Reserve meeting looming next week, you can bet that we will be looking to lock in profits on as many trades as we can before then. 

In the latest Options Income Weekly, I discuss last week’s trades and take a closer look at the decision to close positions early. 

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