Sunday, March 11, 2012

He who rides a tiger is afraid to dismount...

That Chinese proverb just about sums up my feelings on Sears Holdings, which has been on an absolute tear in 2012.  Nonetheless, after much deliberation (and honestly, angst), I decided to trim my position once again.  Specifically, on Friday I sold my remaining 25 contracts for the Jan 2013 $95 options at $6.80, generating proceeds of $16,986 (I'd sold the other 10 contracts in February 2012 for proceeds of $1,239).

For those of you following my blog, you know I first bought these particular options all the way back in November 2010.  Between then and August 2011, I added to my position 3 more times (click on the "zz Sears" label to the right to read about all my Sears transactions).  When all was said and done, I'd invested $14,592.  Then came December 2011, which was not kind to Sears investors.  In fact, as of 12/31/2011, my 35 contracts were worth $210 (that's no typo, my $14.6K investment had shrunk to two hundred bucks!).  Now, less than 3 months later, those same 35 contracts have been sold for total proceeds of $18.2K!

But why sell now, after all things are just getting interesting?  Well remember, I'm not selling out of Sears, but rather just trimming my position.  In fact, back in December when things were looking really bleak, I bought $18,329 of stock plus an additional $4,012 of Jan 2014 $55 options.  So, given my significant exposure to Sears from these purchases, I could no longer justify holding options that were both 1) out-of-the-money and 2) had less than a year until expiration.

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