LVS - update

I closed out LVS today for a quick profit. I view this as "A bird in the hand is better than two in the bush". If you can get a quick decent profit, then take it and use that margin to enter another trade rather than trying to let the trade keep on going to POSSIBLY get the rest of your profit.

Check out the chart:

The reason I took profit today was that the price was coming down to support and the 50 day moving average, where I expect to either see a bounce back up or possibly some sideways action. I'm not close enough to expiration (which is in November) for Theta to really be decaying the value of this trade yet, so the sideways option isn't that attractive.

Here's what happened with the trade:

I originally sold the November 19 Call and bought the November 21 Call on 10/12 and I received a $0.57 credit for it. Today (9 days later), I bought the spread back for $0.25.

This gives me a profit of $0.32. Whoop-dee-doo, guess I can buy Sweden now (you might be thinking). But, what you really have to do in trading is to compare apples to apples. The way to do this is by figuring out your Return On Investment (ROI).

The ROI on this trade is figured by taking the net profit divided by the margin required. $0.32/$2.00 = 16% Again - big deal. BUT REMEMBER this was in 9 days!! Let's do some basic math. If we have 30 days in a month, divide that by 9 gives us approx 3 (and change). So if we did this same trade 3 times in a month, then that would be approx 3 times 16% = 48% ROI per month or approx 576% ROI per year.

So, bottom line: don't concentrate so much on how much you make, but rather your ROI.