Research in Motion (RIMM, $107.14, down $2.20) is slightly lower as we head into the afternoon trading session. The stock hit $110 earlier this morning and I wanted to update the strangle option trade.
Our exit target for the October 120 calls (RULJD, $4.45, down $1.05) was $5.50-$6.00 and this part of the trade should have been sold on Thursday or this morning when the calls hit a high of $5.70. It is important that you stick to the parameters of this trade or otherwise it won’t work.
The calls should have netted you $11.00 since we were doing two calls for every one put option. Our entry price was $8.26 ($3.22 x 2 + $1.82) for the two calls and one put. By selling the calls now, we have guaranteed ourselves a 35%-40% profit and we still have the put options.
The October 80 puts (RFYVP, $1.30, up $0.05) could also be closed if you wanted to bank the 50% return for the weekend but more than likely, I will just let them ride. Our profits are already locked in and if we wanted to we could let the puts expire worthless and still make money!
That is one of the beautiful things about these types of trades. The options don’t expire until October 17 so we can leave them open over the weekend without any worries either way because our profits have been locked up.