A few weeks ago, and again last week on the Buzz & Banter [subscription required] I recommended buy-writes on Ubiquiti Networks (NASDAQ:UBNT) (see How to Play Ubiquiti Networks Ahead of August Earnings) as exceptional rate-of-return trades on a beaten-down stock with a good story (and, before the second recommendation, an announced buyback). The stock took off last week, and now it's time to take some money off the table. While it will cut into returns a bit, there's the old saying about bulls, bears, and pigs: bulls make money, bears make money, pigs get slaughtered. Depending upon your original execution of last week's suggested buy-write, if you lock in the trade by buying the June 35 puts for $0.20, you still should have an annualized return of 100% or more.
While the stock is unlikely to dip below 35 over the next week and a half, I learned long ago not to stay short nickel and dime puts (or the equivalent), and I'm employing that lesson here. I suggest you do the same.
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