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.
In other words:
I’d be risking what I’ve earned for what I might earn — and I don’t love that setup.
I’d rather take the nearly 3x return I’ve locked in now, celebrate the win, and redeploy that capital into my next best idea.
There’s a difference between letting winners run and being greedy.
This wasn’t fear. It was math.
Congratulations to All Star Options subscribers who took this ride with me!
Sean McLaughlin | Chief Options Strategist, All Star Charts
