We are coming in the close of the year, which means I need to consider how I want the timing of the last round of purchases to go. The stock is not currently in a position for me to sell a call option to facilitate the sale the way I would like. I am considering selling the stock out-right, and rolling it back in to a repurchase. Even though there is a 3 month holding period for the stock, I don’t need to be concerned with whether or not there are 3 months left in the year, because as long as I make my purchase of the remaining ~$15,000 of 2017 allowable ESPP before the year ends, I will be able to max out the program, which is my main goal. Unfortunately, this method hampers my options strategy, but I have to do what is most reasonable and most profitable.
Since it is currently September, I could still sign a 90 day contract and plan a stock sale before the year is over, but there are currently no December contracts available, only November. I really like to sign an aggressive (near the money) 60-90 day contract to facilitate a sale, but the stock price has been so depressed recently that both my profits and the option premiums are low. To explain further, I sign an aggressive near-the-money 60-90 day contract when the stock price around my 10% gain, if I sell or sign now, I am only sitting at a 5% profit.
Example of where it is now – If the option premium for a 60 day contract is only 0.8% of the total, and the commission required to sell is 10% of that premium, Those incremental gains are not meaningful enough for me to sell. It would be much more meaningful for me to sell stock, and repurchase at the 10% discount, which is always a pleasure.
I have signed a couple of great 90 day contracts where the premium was 3% of the total share value, and the commission was only 1.5% of the premium. Those are the meaningful gains I sign up for. I commend the person that is playing the long game by incrementally getting 0.5% and 1% gains multiple times per year; that is great and your money will grow very quickly, but that is a little different than what I am trying to teach on my blog. Also, the commissions that would be required to move in and out of those positions of incremental gains would take up a large percentage of your profits.
Work the numbers, follow rules, and calculate percentages, then make decisions based on those factors.
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