Just in case any of you decided to heed my advice and sell put options on CIGX as I discussed in an earlier post, I wanted to go back and give an update on this trade as it stands going into the Memorial Day holiday.
As I stated previously, I sold put options which expire the third Friday of June on the stock symbol CIGX with a strike price of $4.00 and the stock price at the time was just above $4.00.
For every 10 options that you could have sold, you would have made $350.00 less commissions. To put on this trade, you would have to have $4,000.00 in cash in your stock account for every 10 options. You would also have to have option trading privileges of course through your broker.
This stock has been outstanding this week as it has traded up to $5.00 on Friday, which is nearly a 20% increase in share price since Monday. The value of the sold put option has decreased from the $0.35 per share to a current bid of $0.25 and ask of $0.30. We could close this transaction by buying back the 20 options we sold and pocket $100.00, if we so chose to.
Now, for the option to end up hurting us it would have to close down over $1.00 between now and June 17, which is only 14 trading days away. I believe this stock has even more room to the upside, so our trade looks solid. If it can bust through prior resistance at $5.00, it may experience a huge move up…making us wish we would have purchased the stock outright instead of selling puts.
A quick check of after hours trades shows the stock trading north of $5.00 a share at $5.03. If the stock continues to climb in the next few days, we may close out our position for a quick gain instead of waiting for the June 17 option expiration.
We will scour the market for another potential put sell over the weekend and let you know what we come up with.
As always, our commentary is just for educational purposes. We may or may not have funds invested in the stocks profiled (in the case of CIGX we do). You own your own investments, so please do your own due diligence before making any transactions. Only you know what your risk tolerance is and whether or not a stock fits your trading style. We are not responsible for any losses you may incur by following our ideas.
For more information, read our previous article we posted a few days ago explaining the sell of puts on CIGX. This can be a great way to make additional income on stocks you would like to own. Click this link to read our earlier article.