This morning I get to enjoy one of those events that occur for a trader maybe a dozen times annually. I call them the monthly double. A monthly double is when a position you take at the start of the monthly options trading period gets assigned or called from you during the month long period of the position. Nothing is more sweet than being able to double up on your profits in a 30 day period on the same position. Note that I plan for these events to occur regularly which means it involves a lot more factors than just plain luck.
Here is how mine worked this month. I was assigned 1200 shares in HCN on Oct. 21 having sold a put option on the stock the month prior in late Sept. So I had already made money on this position of $1.55 per share on the put option having owned nothing. Now owning the 1200 shares I sold a call option on the 1200 shares for $1.30 per share on October 24. Friday the 1200 share position was called from me after owning it less than 2 weeks. Today I sold another put option on this stock for the final two weeks of the option month for $1.05 per share That's $3.90 per share for the period on a $50 stock , or 7.8% over at most only two weeks of actual ownership. Annualized that is 46.8%% since I will hold this position through the two month cycle. Add in that I will get to do this again at the end of two weeks. This is why a monthly double is so sweet.
HCN is one of my favorite plays with solid fundamentals, good dividends which just got raised this week, and high options opportunities. It illustrates why stock selection is so critical to trading derivatives in a hedge fund model.
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