In early November, I entered a 2 contract long call option trend trade on an Oversold Buy Signal (the green arrow). Today I rolled my deep in-the-money Comcast long call option down from the April 47 to the April 44 strike. The options have appreciated nicely and my rule calls for a roll down any time the option delta gets above .85 to a strike near the .70 delta. If you don't speak option gibberish: this means that I took partial profits on the trade.
- Here is the order that filled: SOLD -2 VERTICAL CMCSA 100 APR 14 44/47 CALL @2.37 ISE.
- That resulted in a cred t of $2.37
- It reduced my risk on this long term trend trade, by lowering the cost basis from $4.50 to $2.13. (because I extracted a a $2.37 credit)
- Comcast remains in a solid uptrend, in a strong industry group with a VERY BULLISH Power Gauge rating. No need to exit this trade. As long as CMCSA keeps making higher highs and higher lows, I'll keep rolling my option down through about mid March, extracting profits as I go.
- It is rolling up out of oversold territory. When the stock gets overbought, I'll consider selling an out of the money call option. This is like rolling into a covered call trade, but with a deep in the money option. Some call it a diagonal. I call it a covered call on steroids. The return potential is much greater than with a covered call.
- Today could be a decent entry opportunity, but I'm going to keep running with 2 contracts and free up capital to find another option trend trade to diversify.
- See the Chaikin User Option Portfolio trade results here
RSS Feed