Monday, April 23, 2007

AMD Options Assigned

As I discussed in an earlier post, I bought 300 shares of AMD at $13.00 each, and wrote 3 options contracts to sell at $14.00 with a $0.30 premium. Well, on Friday AMD closed at $14.16, which is more than $0.05 in the money (the most common automatic exercise threshold). Not surprisingly, then, my contracts were assigned.

So, I automatically sold 300 shares of AMD at $14.00 with a $20.06 commission. I'm not sure how the commission is computed, honestly. But, I made $300 - $20.06 in the sale, plus $90 - $15.24, minus the original purchase commission of $12.99. All together this is a profit of $341.77, which is an 8.76% profit on my initial $3900 investment under a month ago. Not too bad.

Even better, I really do think AMD will go down in price again, and I don't think I would have sold my shares otherwise. So, I'm locking in some profit that would otherwise have been likely to disappear in the near future. This is a short term capital gain, however. Also, I'm more impressed with the rate of return than the actual dollar value of the profit. Still, $350 is most of a washing machine.

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