Closed 3 SESN contracts with a max loss, Penalty trade & Dividend Capture with WMB

On September 8, 2021, I closed half of the SESN credit spreads with max loss.

A long story short - SESN was trading well above $4 per share about a month ago, but after some negative announcement from the FDA, the stock dropped under $1 per share.

Luckily I was trading credit spreads and not just put options and my max loss was limited to the width of a spread, which was 1 dollar wide.

Sold 7 Credit Spreads on SESN – 11.80% potential income return in 42 days

Now, not willing to take a full assignment next week, I decided to close part of the contracts and bought back 3 of them.

  • SLD 3 SESN SEP 17 '21 - 4 + 3 Put Bull Spread -1.037 USD

My total loss after closing these 3 contracts: -167.40$

I'm still holding 3 credit spread contracts with SESN with an expiry next week

I never like losing trades, and because of them, I have developed the so-called penalty trade, which means - the same amount I'm losing from closed trade I buy some quality stock, and hopefully next time I will be more careful and not engage in bad trades.

After a quick research, I found Williams Companies or WMB stock, which seemed a good fit for a penalty trade. The stock is quite stable, it has a pretty awesome more than 6% dividend yield and the best we can trade options with this stock.

As WMB went ex-div I decided to try a dividend capture using options - buying 100 shares just before stock goes ex-div, using increased volatility and sell in the money call option, and capture the dividend.

Here is the trade setup:

  • BOT 100 WMB Stock 24.838 USD

  • SLD 1 WMB SEP 10 '21 24 Call Option 0.83 USD

I bought 100 shares paying $2,484 and sold a call option for 83 dollars but with a lower strike price expiring in next 2 days. As the stock goes ex-dividend I'm entitled to $41 in dividends.

Break even: 24.84-0.83+0.41= $24.42

Here I made a quick YouTube video trying to explain:

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