News for Today (5-Jan-18): Capitalizing On Gains With Option Trading (PRLB, DG)


Being home on vacation for a few weeks may or may not be a good thing – for one, I can catch up on many blog posts and ideas I want to write about.  The potentially bad part is that I have more time to “tinker” with my portfolio and execute on the more gambling “itch” or short-term / day trading side.  With that, this is a short post of two trades literally executed within the past hour.

Trade #1: Feb $115 Covered Call on Proto Labs Inc. (PRLB)

This contract prototype manufacturer has surprisingly done well this year despite growth only in the low teens.  We initially purchased calls at the beginning of the year, and then exercised them in October only to have the stock continue to run up well past $100 now.  As mentioned back in October, I don’t mind owning  this company while the 3D printing landscape (and actual business model) play out.

To capitalize on what I view is a high price tag on a company growing at only 10+%, we’re going to sell calls against our shares.  I’ve picked the Feb $115 call, receiving $2.50 for each share – and at the current market price around $106,  that’s 2.3% for 42 days (or over 20% annualized.  I could have chosen the $110 strike for about $4 given how far the stock has run up and the overall market perception these days, a 4% gain in a month could be reached and then I’d have to figure out if I want to roll the call, or buy back shares.  At $115, it’s 8.5% gain and almost 10% after including the option pricing.  Best scenario is that the stock price stays below $115 (we keep the premium) and the high share price; and get to repeat this process 4-5 times throughout the year.

Trade #2: Closing our Dollar General (DG) Technical Analysis Play Early

Back in October, we started to get into some technical analysis – and we picked Dollar General (DG) as a short-term trade candidate.  In full disclosure, I didn’t actually draw the chart below (I’m starting to learn how), but I follow some folks on social media who showcase all these charts and graphs and this was one (actually, the only one) that I just action-ed on by buying January calls.

Technical - DG

By luck, or not, DG has performed exactly as expected (at least according to those who create these charts) with a target that looks somewhere around $93-95.  So in early December, when the stock hit $93, we sold half our options – which had doubled – and effectively making back our money in a month and let the remaining half ride to the end.

Today, with the stock at $95, and pretty much hitting the same peak as back in 2016, we’re unloading the rest a week and a half early capping off our first successful technical trade – for a nice 140% gain in 2.5 months (too bad life savings weren’t invested in this trade eh?).  Whether by skill or luck, we’ll take our gains and hope for more successful trades in the future.


2 thoughts on “News for Today (5-Jan-18): Capitalizing On Gains With Option Trading (PRLB, DG)

  1. Pingback: Trades for Today (12-Jan-18): More Locking in Gains with Options (BAC) | Fearless Cal's Investment Journal

  2. Pingback: Portfolio Update – January 2018 (+8.4%, Currency -1.7%) | Fearless Cal's Investment Journal

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