PALM - update

I had to do a bit of work on PALM this past week, here's the chart:

I still have my bullish bias on this stock. We're currently trading sideways and I'm anticipating a breakout to the up side. Some technicians would call this pattern (with the converging blue lines) a "pennant".

I originally sold the Credit Spread on 10/12 for $0.57. However, we got a day away from the October Expiration and my short leg of that spread (i.e. the $17.00 October Put Option that was sold) was in the money. What this means is that if I let Friday go by and I don't close the trade first - then I'll have to buy 100 shares of PALM for $17 (even though it's trading lower). So, this is bad.

Instead of having to buy those shares, I instead closed out the trade by buying the option I sold and selling the option I bought.

I closed out the trade for $0.77. So, I had an initial loss - boo, hiss.

I sold the spread for $0.55 and bought it back for $0.77, which is a $0.22 loss per spread sold.

However, the trade is not done. Instead of just taking a loss, I looked back over the trade and I'm still bullish. I still think I'm right and that it's going to breakout to the upside.

So, I "rolled out" this spread to the next month. If you look up "rolling out" for an option online, then you'll get more info than I'll provide here.

I rolled out this spread and sold the November 16 Put Option and bought the November 15 Put Option for $0.40 credit per spread.

So, I had an initial loss of $0.22, but then brought in $0.40 on a new spread. This gives me a net credit to date of $0.18.

I now am looking for PALM to move up and break out of that pennant. When it does, I'll close my trade down with a net profit.

Keep tuned for more updates on PALM.