Investment Reflection on GOLD Cash Secured Put Option
On May 8, 2024, I executed a cash secured put option trade involving 2 contracts of GOLD with a strike price of USD16.50 and a maturity date of May 24, 2024. The option premium collected was USD0.32 per contract, resulting in an immediate income of USD64. This trade was positioned to capitalize on potential short-term price stability or a slight decrease in the price of GOLD while generating income.
The market conditions the following day presented an opportunity to close the position early. On May 9, 2024, I decided to buy back the options for USD0.15 per contract, locking in gains and closing the position. This decision was motivated by the swift decrease in the option premium, presenting a chance to secure profits.
Performance Review
- **Option Premium Collected**: USD0.32 per contract (totaling USD64 for 2 contracts).
- **Closing Cost**: USD0.15 per contract (totaling USD30 for 2 contracts).
- **Net Profit**: USD64 - USD30 = USD34.
Reflections and Lessons Learned
1. Quick Execution and Profits:
The trade was successful in terms of timing and profit generation. By closing the position early, I was able to lock in a net profit of USD34 within just one day.
2. Market Conditions:
Being aware of and responsive to market movements allowed for the early closure of the position, minimizing the risk of adverse price changes that could erode profits.
3. Strike Price Selection:
The chosen strike price of USD16.50 allowed me to collect a reasonable premium while offering a degree of safety given the prevailing market price of gold.
4. Early Exit Strategy:
The decision to close the position early demonstrates the importance of having an exit strategy in place. This allowed me to capitalize on favorable market movements and reduce exposure to potential downside risks.
Conclusion
This option trade resulted in a successful short-term gain of USD34. By actively monitoring market movements and remaining flexible in the execution of my strategy, I was able to capitalize on favorable conditions and secure a profit. This experience underscores the value of having a well-defined trading plan and being vigilant in its execution.
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