Yesterday I closed a short put position in Fastly (FSLY) that was due to expire at the end of this week. Perhaps I paid too much, $107.40, to close this position, but I took advantage of a rise in FSLY shares (which closed near $76 on Friday but opened around $83 on Monday) to sell a different call option with more time value (read: longer time to expiration) and a higher strike price ($110 up from $90).
Ultimately, we held the short position in the September 18 FSLY Call for six days and earned a 1.4% return (premium divided by the call value of our shares). On an annualized basis, we earned 85.5% more than the $9,000 we would have received were the option executed.
The new, longer-dated, higher strike price option expires on October 30th and we received $300 to allow our counterparty the right to buy at $110. Were our shares be assigned to the counterparty (the person/company who was long our option), our shares would sell at $110; more than 30% higher than yesterday’s market price, 22% greater than the $90 strike price of the call option I closed.