To The Moon

Overview

On June 5, 2024, I engaged in an options trading strategy by selling two cash-secured put options on GOLD $Barrick Gold Corp(GOLD)$  stock, with a strike price of USD 16 and a maturity date of July 12, 2024. At the time, GOLD stock was priced at USD 16.70. By selling these puts, I collected a premium of USD 35 per contract, expecting the stock price to stay above the strike price or planning to buy the stock at a discount if it dropped.

Strategy and Execution

The strategy behind selling cash-secured puts was straightforward: collect premium income while being prepared to purchase GOLD stock at a favorable price if assigned. This approach aligns with my bullish outlook on GOLD and my willingness to acquire shares at a lower price point.

Initial Position:

Sell Date: June 5, 2024

Strike Price: USD 16

Stock Price at Sell Date: USD 16.70

Premium Collected: USD 35 per contract

Total Premium Collected: USD 70 (for two contracts)

As expected, the stock's price trajectory remained favorable. By July 5, 2024, GOLD stock had appreciated to USD 17.44, significantly above the strike price. To close my position and lock in the gains from the options sold, I bought back the put options at USD 2 per contract.

Closing Position:

Close Date: July 5, 2024

Stock Price at Close Date: USD 17.44

Premium Paid to Close Position: USD 2 per contract

Total Premium Paid: USD 4 (for two contracts)

Profit Analysis

The profit from this option trade can be broken down as follows:

Premium Collected: USD 70 (for selling the puts)

Premium Paid: USD 4 (for buying back the puts)

Net Premium Earned: USD 66

This trade resulted in a net profit of USD 66, which is a substantial return given the short duration of the trade and the initial risk exposure.

Strategic Insights

Market Analysis: The decision to sell puts was based on a bullish outlook for GOLD, which proved accurate as the stock price increased over the period. Proper market analysis and timing were critical in this strategy.

Premium Collection: Selling options provided an opportunity to collect premium income upfront. This strategy is particularly beneficial in a stable or rising market environment where the likelihood of assignment decreases.

Risk Management: By selling cash-secured puts, I was prepared to buy the stock at the strike price if it fell below USD 16, which aligned with my investment goals. This approach mitigates risk compared to uncovered puts, as the necessary funds to purchase the stock were reserved.

Flexibility and Control: The ability to close the position early by buying back the options allowed me to lock in profits and manage my exposure effectively. This flexibility is a significant advantage in options trading.

Conclusion

This cash-secured put strategy on GOLD was executed effectively, resulting in a profitable outcome. The stock's appreciation above the strike price allowed me to capitalize on the premium received without the obligation to purchase the stock. This experience reinforces the value of combining market analysis with strategic options trading to achieve investment objectives.

Future considerations will involve evaluating market conditions continuously and being ready to adapt strategies accordingly. The successful closure of this position underscores the importance of having a clear plan and the agility to act as market dynamics evolve.

$GOLD 20240712 16.0 PUT$