Assigned early on Netflix. Paid well on MongoDB.

Hey friends — Joe here.

📊 Trades on the Table lands every Saturday. One real position, why I opened it, and what had to be true.

Nothing here is advice. Just what's on my screen and how I think about it.

Two puts this week, and one lesson from each.

1. A put can be exercised before it expires

When you sell a put, you promise to buy 100 shares at the strike price. It is easy to assume that promise only comes due on the expiry date.

It can come due on any day before that. With options on US stocks, the buyer picks the day.

On our community call on 30 September, a member asked me about this. I said it was possible, but that it had not happened to me in four years of selling options.

That same week it did.

On 2 September I sold six Netflix puts at a US$78 strike, expiring 2 October, for US$708 in premium. Netflix closed that day at US$82.73.

By 29 September it was near US$70. Five of my six contracts were assigned after the close that day, three days before expiry. The sixth followed the next day.

When a put is that far in the money with days to go, the buyer has little left to gain by waiting.

I now own 600 Netflix shares at US$78. Thursday's close was US$71.57, so they are down about US$3,900 on paper. I'm holding them and selling covered calls above my cost.

Early assignment did not change the price I paid. It changed the date.

A put is a promise to buy. Be ready to keep it from the day you sell, not the day it expires.

2. A bad-news day can be a good day to sell a put

On Monday 28 September, MongoDB's CEO left for a job at Meta. The stock had closed Friday at US$410.44. It opened at US$311.35 and closed at US$334.68, down 18% on the day.

I asked one question. Did the news change the business?

The company reaffirmed its guidance for the quarter and the full year that same day, and its former CEO came back as interim. Same product, same customers.

So that morning I sold one put. US$300 strike, expiring 30 October, for US$1,003.

Two things made it worth doing.

The pay was high. On a day like that, fear pushes up what buyers will pay for puts. US$1,003 is 3.3% return of the US$30,000 it would take to buy the shares, for 32 days.

The strike was far away. US$300 was the day's low, and 27% under Friday's close. Take off the premium and my cost would be about US$290 a share.

The risk caused uncertainty around the stock. A CEO leaving can turn out to matter. I judged that this one is more a knee-jerk reaction, and I could have been wrong.

Had more bad news landed, I would own MongoDB at US$290 effectively which I am comfortable to do so.

The stock recovered some of the fall, and on 6 October I bought the put back for US$230. I kept US$773 of the US$1,003, in eight days.

When a stock you like drops on news, what do you do with it?

Keep growing!

Joe

This is a description of trades I personally made — not investment advice, and not a recommendation to buy or sell anything. Selling puts carries real risk, including being obligated to buy the stock at the strike if it falls, and covered calls cap the upside on shares you hold. Options aren't suitable for everyone. Figures are as recorded in my broker account on the dates shown, in US dollars, before commission. The paper loss is unrealised and will have moved since, and the MongoDB put was still open when this was written.

The Income Stack runs three times a week — 💡 One Idea on Tuesday, 🛠️ The Solopreneur Stack on Thursday, 📊 Trades on Saturday.