Since 2018, Sean has served the financial community as Chief Options Strategist for All Star Charts, sharing his unique style of options trading, leveraging the best-in-class technical analysis offered by the All Star Charts research team.
In all endeavors, Sean has been consistent in building a support system around himself and for others that he wishes he had when he started out back in 1998.
Today I closed out a trade in $CRK that I opened back in mid-March — a September 22/30 Bull Call Spread I bought for $1.85.
The most that spread could have been worth on expiration day is $8.00. I closed it today for $5.40:
So naturally, the question is:
Why didn’t I hold out for more?
Simple: Time and risk.
There are still 93 days left until expiration. Yes, the stock is trading above my short strike, and yes, in theory this spread could still work its way up to full value.
But holding for that last $2.60 of potential upside means I’d be risking the $5.40 it’s worth today — a healthy open profit — for a maybe.
That’s not a tradeoff I like.
I know, I know — once both strikes are in the money, a debit spread becomes a positive theta position. Every day the stock stays above the short strike, a little more value seeps into the trade. I get that. But the key word is “a little.” Theta drip is slow and steady. The risk of a sharp reversal, especially after the run $CRK has just had, feels much more significant to me.
Today's trade is in a $29B ultra-processed packaged foods giant that has been struggling since 2023 and feels like its hanging on the precipice of a deeper fall.
Whether or not that comes to pass, this stock feels like a good place to put on a slightly bearish bet to give my bullish portfolio a bit of diversification in case the broader market stalls here.
