On 15 Oct 21, I sold a PUT contract on Nvidia at a strike price $235 and collected a premium of $2025 (8.6%). The contract will expire worthless if Nvidia stays above $235 on 19 Nov 21 (35 days contract).
Read more about the article here:
I Made 8.6% Returns In 35 Days By Buying Nvidia Share Option Contract (15 Oct 21)
Nvidia shares have been on a fantastic uptrend since I sold my PUT contract and I have decided to close the contract by buying the PUT option at the same strike price and expiration date (as illustrated in Example 1 in the above article).
The reasons for doing this are:
- I have already made $1405 out of a maximum $2025, which is 69.4% in less than 2 weeks. I do not wish to hold onto the capital for another 3 weeks plus just to gain another 30% of premium
- The risk of holding on means price could drop in the coming weeks due to negative news/ sentiments towards the stock
- The sharp increase in share price may not be sustainable in weeks to come as Nvidia is already quite overpriced at $245.
- I free up the capital reserved* to buy this stock to buy other option/ stocks
*Cash Secured Put: In a typical PUT option contract, if you are the seller, you are required to reserve aside the money required to buy 100 units of the share, just in case the contract is exercised on the expiration date.