Yesterday afternoon I provided a quick update for Intuitive Surgical (ISRG, $95.37, up $0.72) which was at $96 but easily took out its 52-week low by the end of the day. The company is still on tap to report earnings after the bell on Thursday.
The February 90 puts (AXQNR, $5.50, down $1.00) were trading for $4.20 when the blog came out but many of you may have already been in the trade from the original write-up on 1/9 at $4.50. There are a couple of points I want to make here.
Yesterday, the puts closed at $6.50 for a 50% profit and you could have sold a little more than half of your position and taken all of the risk out of the trade. Let’s say you bought 10 put option contracts at $4.50 – your cost would have been $4500. If you had sold 7 contracts yesterday before the close, you would have netted $4550. You would then have 3 contracts for an all-or-nothing trade going into earnings.
The other point I want to make is that you could have closed the entire trade and netted $6500 and just be done with it. A 50% gain is a 50% gain. No bones about it. You have to realize…most mutual fund managers or market gurus preach that an 8% return a year is great. Yeah, and that is like watching paint dry. Thanks but no thanks.
The lesson that you need to take away is that each option trade will have its risk but it is up to you to reduce that risk and manage it. I’ll continue to monitor the trade but sometimes Steve Miller is right…somewhere he is singing…”go on take the money and run”…
Rick Rouse
Rick@OptionsMentoring.com
