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Losing My Options Virginity on CNBC Options Action

NEW YORK (TheStreet) --  About nine months ago, I was an options virgin. I had never touched an option before nor did I want to. Trading options takes a vast amount of knowledge, and while I understood options basics at the time, I knew I needed just a little more guidance in order to make my first options trade. At the time, I was happy to be doing my thing, simply trading stocks. I wasn't really out searching for that guidance. I knew it would come at the right moment.

On May 15, 2013, I got a call from Maxwell Meyers, executive producer of CNBC, asking if I would appear on their options program, "Options Action," to place my very first options trade with help from CNBC pro's like Dan Nathan, Michael Khouw, Scott Nations and Mandy Drury. I was SO excited and couldn't think of a better way to place my first options trade.

At the time of my "Options Action" appearance, I had a basic understanding of options, such as calls, puts, strike prices, expirations, writers, buyers, and other such terms. I understood covered calls and rolling options. For those of you who don't have a basic understanding of options, you can catch up here at this link after you finish this blog.

In preparation for my appearance on the show, the producers asked me to talk about a stock that I either had a long position in currently, or one that I would be buying into long, on that day.

At that time, I was in a net-long position in Silver Wheaton (SLW) holding 500 shares at an average price of $23.70. I went to the "Options Action" experts on May 17, 2013, and brought them my stock choice that was down roughly almost $2 from my purchase price.

Although I identify myself as mainly a daytrader who would not ever hold a stock as long as a month as with this SLW purchase, I was comfortable holding onto SLW because of the company's strong fundamentals.

Below is an assessment (I had lots of help from number-crunchers to assemble these numbers) of the recommendations from both the CNBC experts and others who wrote to me after I appeared on the show.

Which play did I choose? 

If I had followed Ajay's advice, I would have had the largest gain for the simplest play. Instead, I made a number of different trades, ending up gaining second best to Ajay. My play was complex because I wrestled through many things, including doubt, a regaining of confidence in my stock choice, a gain in confidence in working with covered calls, and a few other things. 

Here are my SLW stock and options trades.

  • May 20 -- sold 200 of 500 shares of SLW to limit my exposure (doubt)
  • June 3 -- wrote 3 June 25 call options at 59 cents, kept the timeframe short. (covered call)
  • June 22 -- options expired. Ching ching.
  • June 27 -- bought 100 shares of SLW at $18.08. (regaining confidence in my stock choice). Price was just too tempting! Kicked myself later for not having bought a 1,000 shares. Hindsight is 20/20.
  • June 28 -- wrote 3 July 20 call options at 0.93 (covered call)
  • July 5 -- bought to close that option at 0.32
  • July 23 -- wrote 4 Aug 24 call options at 0.78 (covered call)
  • Aug. 1 -- closed that option at 0.38
  • Aug. 6 -- sold 200 shares at 21.093 -- the idea being to lower exposure, and when considering the 100 @18.08 with 100 @ 23.70, I came out a little ahead.
  • Aug. 12 -- sold remaining 200 shares at 24.543 -- overall, including the dividends received and the $120 loss on the 5/20 sale, I was up on the stock so it was time for me to fly.

Here are my profit numbers:

  • On the options:  0.59x300 + 0.61x300 + 0.40x400 = $520
  • On the stock including a dividend:  $124

For a profit before commissions of $644.00

I learned many new things about options from appearing on "Options Actions," which was a catalyst for my jumping into options trading. Here are some valuable Options guidelines for options newbies to consider:

  • There is no absolute right or wrong choice with options. There are just different options for options plays. Decide what you want to do, double-check yourself for accuracy, then go forward with your plan  -- confidently.
  • Trust your stock selection, and don't let others belittle your stock choice.
  • Writing covered calls can provide a nice steady income and with 90% of options going unexercised, according to CBEO. The odds are in your favor.
  • Always accept invitations to go where the experts are. Your gain will come to you in more ways than one.

Enjoy using all of those different options strategies and may the odds be in your favor when it comes to being on the right side of the trade.


Many Happy Returns,

Rachel


Watch my full CNBC 'Options Actions' spot here.


At the time of publication, Fox did not have a position in SLW and does she plan to have a position in SLW for the next 72 hours.

 




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