UNH Long Call Option Trade Evaluation

Hello Option Trading Friends,


I closed the UNH position on Christmas Eve due to the poor performance of UNH since hitting highs. The rally in the stock had fizzled and I had to move away from the position once the CALLS at the 30 strike were trading at $2.00. This is equal to the purchase price of 10 of the CALLS I had purchased on the 11th of December. I decided to lock in the gains and move away from the trade with a very good gain. The entire position was closed with just over a 30% gain prior to commissions. I feel this was a very well executed trade, although I gave a little back at the end of the trade. I am still very pleased with the performance of the trade. This may be a position I look to establish again, or even look at a spread strategy due to significant support at the 30 dollar level. I will have this on my watch list and if the pull back continues to that level I may enter into the position again. I like the health care sector because of the passing of the bill through the Senate giving more clarity to the direction health care reform is going. We still have significant negotiations between the Congress Bill and the Senate Bill and when that is done investment into the sector will be much easier to evaluate. Like I always say clarity is the best situation for the market. When we get that clarity the underperformance of the sector should subside and appreciation should be much easier. I am done selling the thesis for the sector. I am doing a lot of looking for good setups to enter various trades, but patience has been good for me in recent trades. The S&P 500 has performed well, but with it trying to break out of this current range it is in I am finding trades hard to commit to because of potential breakdown in the market. The start of the year has me nervous to an extent, but with the break above 1120 on the S&P I am encouraged. The lack of volume in these holiday trading sessions has not convinced me though. When positions are taken here at the start of the year it will be interesting to see how the market reacts and the amount of volume will be important. I continue to look for favorable setups in either direction. I will also be listening to all those smart people out there making projections to get an idea of what the smart money is thinking and where they are positioning for the New Year. Look for my next trade, live updates will come via Twitter (Option_Coach), and what my thoughts are for the next year. I am a little more flexible than most. I have my general thesis, but I am not afraid to change direction based on the current actions and trends of the market. That is exactly why I love option trading. I am always ready to move, and can use many different strategies to support my thesis. Below is a chart of my last trade and the detailed performance of the trade. I am going to continue to try and give you as much detail on my trades as possible to demonstrate my performance. I hope that it is helpful and that if you follow me into the markets that you are getting the information you need to be effective and confident in the trade and the strategy. I look forward to comments and would really appreciate the follow of the blog. I will try to answer all the questions generated promptly. Enjoy the New Year’s Celebration and happy trading to all of you. Here is the evaluation I promised you.

Positions:

07DEC09 Long 5 contracts JAN 2010 28 CALLS (UNHAT) @$1.50
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $2.00
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $1.73

Closed on December 24, 2009:

07DEC09 Long 5 contracts JAN 2010 28 CALLS (UNHAT) @$1.50. Closed 24DEC09 for $3.65
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $2.00. Closed 24DEC09 for $2.00
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $1.73. Closed 24DEC09 for $2.00

Total Capital Invested: $4,480
Total Liquidation Amount: $5,825
Total Capital Gain: $1,345
Percentage Gain: 30.02%

Note: Totals do not reflect commissions paid for the trades. Actual gain will be slightly lower due to the commissions. I do not include the commissions for simplicity and because of the different rates that are charged by brokers.