The $1000 trade
I’m on vacation in the Philippines with my girlfriend and it’s 3:33 am. A little random if you ask me but I guess no matter where I’m at in the world, I can’t get good sleep. And that’s why I’m here. I feel I can’t sleep even more because of what’s happening in the stock market. I’m assuming its earnings? I don’t think there’s any big FED releases so who knows.
What’s keeping me up is this position I’m currently in. Not too long ago I bought 30 call options of Starbucks(SBUX). When I bought it, it just recently did a nose dive. Like 17%. That’s a lot in my opinion and me being me, I didn’t think there was any merit as to why the stock was falling so hard. So I took a stupid risk and decided to buy the contracts thinking it’ll go up because looking at the past price history, SBUX should be floating around $84-88/share.
My specific trade is this. Bought 30 call options on 5/1 at $85 strike for $0.34 each. To better understand this, a single option controls 100 shares, and the purchase price reflects this as well. So for my case, I’m technically in control of 3000 shares at the cost of $1020 [($0.34×100)*(30)]. So all in this is a $1020 position. Not bad…? I didn’t know at the time.
Now why this trade is keeping me up at night is because of the nature of the trade. This can possibly be my best trade ever.
This trade is worth $1020. Why this is significant to me is because this money isn’t even mine. I’m trading on Robinhood and most accounts have margin. I’m not sure if my own is free but if I recall, the first $1000 is interest free? I don’t know because I’m not gold so as of me writing this and not looking into it, I’ll just assume this is free.
So anyways, SBUX has been trading up and sideways. I just see a lot of people talking crap about the stock and honestly this whole time I’ve had the options, things were dicey and always kept me on edge. Because again, I didn’t look into why the stock was falling. I couldn’t find much info as to why this was happening so I was just under the impression that there is no merit as to why this thing was falling.
When I randomly checked my account I saw I was at +$360 in account value, then other days I saw that I was -$360 in account value. I kid you not, this thing swings like crazy because of its options. When you see the % gain or loss it’ll make you think. $300 off $1000 is 30% mind you. So making 30% on a position that wasn’t even your money is high in my opinion. So yeah this position keeps me on my toes. And the fact I’m in the Philippines for a short vacation and weirdly without data, I’m always on edge because checking my account isn’t the easiest thing to do. In fact, I probably checked into my account today due to the fact that my girlfriend is sleeping so I tethered off her phone (she’s the smart one to buy data).
So to put the long story short (LOL basically at the end of me writing this), I bought call options when SBUX was trading at $73.30/share on 5/1. As of me writing this right now today at 5/23, SBUX is at $80.87/share. This puts each of my call options at a value of $1.43/call; this is a big difference from the initial $0.34/call.
So with all that said and as of me writing this right now, my position value is at $3270 from my initial $1020. That’s a 320% increase in value. Now what makes this crazier to me is the fact that this isn’t even my money in a sense because it was on margin. So to me my return is just insane.
I’m sure people probably saw bigger gains but this is just going to be another story in my slow grind to reaching a larger account. Who knows what’s going to happen next. The stock could go up, it could go down. This entire account could possibly wipe out tomorrow for all I know.
I’m not sure where I see this position going but I’d like to hold on until it hits the $84-85 realm. Simulating this position in the next few days, the price expectation is going to be roughly $7200. That’s roughly about double my current position and to get to this point, SBUX has to go up 4.25% in the next 5 days. Before May ends, I’ll look to close my position wherever the contract is at.
Thanks for listening to my midnight TedTalk 🙂