This week, in addition to the weekly results, I have a few more things to write about. Right now I’m sitting in a hotel room in Boston working on Main Street beats Wall Street and some option strategies. Very similar to what I did at the end of last summer. Only than I was working on my offense for the upcoming basketball season.
First lets get into this week’s results. My trading volume is starting to get to where it used to be. Between selling stock holdings and mounting profits, my account is ready to expand.
Micron
7/15/19 – Sell to Open 10 MU 7/19/19 $45.00 C @ $47¢ (+$470)
7/16/19 – Buy to Close 10 MU 7/19/19 $45.00 C @ 17¢ (-$170)
Profit +$300
My first trade of the week was the sale of Naked Call on Micron. Check it out at Sold 10 Micron Calls. These were Naked Call so I jumped out as soon as I was making a profit.
Square
7/12/19 – Buy to Open 10 SQ 8/16/19 $80.00 P @ $2.92 ($2920)
7/16/19 – Sell to Close 10 SQ 8/16/19 $80.00 P @ $3.45 ($3450)
Profit +$530
Next I bought 10 Square Puts. Read at Bought Put Position With Square. I held them for 4 days and sold for a nice profit.
Advanced Micro Devices
7/17/19 – Buy to Open 35 AMD 8/16/19 $34.00 P @ $2.29 ($8015)
7/18/19 – Sell to Open 35 AMD 8/16/19 $34.00 P @ $2.80 ($9800)
Profit +$1785
On Wednesday I felt strongly about a little pullback with AMD. I bought a pretty large position of Puts. Read about it at Bought AMD Puts. It went down as predicted and I jumped out the next day for a great profit.
Advanced Micro Devices
7/9/19 – Buy 1000 Shares AMD @ $32.65
7/18/19 – Sell 1000 Shares AMD @ $33.10
Profit +$450
On 7/9 I bought 1000 shares of AMD to cover the 1st leg of my Triple Play Hedge. With the stock going down I decided to see for the profit leaving the Calls of my Triple Play Hedge Naked. I have since bought back the shares. But not without taking this profit.
Advanced Micro Devices
7/5/19 – Sell to Open 10 AMD 7/19/19 $33.00 C @ 50¢ (+$500)
7/19/19 – Expired 10 AMD 7/19/19 $33.00 C
Profit +$500
This is the 2nd leg of my Triple Play Hedge. It expired Friday. However, I didn’t get assigned on the shares that covered this Call. This was a $33 Call and the stock closed at $32.50. I have one more leg to go and the Triple Play Hedge will be history. Since I didn’t get assigned this week I still own the 1000 shares to cover the 3rd and last leg.
This was a very good week! I’m happy.
Total Weekly Gain +$3565
Next week have fun working. I’ll be working in my underwear!
I’ve been working on some new strategies. Selling Calls will always be my #1 but there is a lot more to do if you want to be a complete trader. Since this is a learning site I stay away from teaching buying options. But believe me, I’ve bought a lot in my day. And I must be honest, I’ve also bought a decent amount lately. I don’t talk about them on Main Street beats Wall Street, but I think I’ll start. You will be reading about some of my new strategies soon. One later in this post.
My son Stephen Jr, The Grasshopper, is getting pretty knowledgable about options. I feel he learned about options with a good foundation in selling Calls. I think I did a great job pushing selling and not buying because when he see me buying Calls he seems a little weary. I think this is good. I think from the knowledge of selling Calls he has a respect for Time Decay. And how it can kill you when buying options, with the Time Decay working against you. This is exactly what I wanted from his education, and for yours.
The bottom line is Selling options is safer than buying. Buying will bring out the gambler in you because the profits can be so large with a smaller amount of money at risk. But, you must remember, 80% of bought options expire worthless. This is a fact! PERIOD! So, you will be seeing me buy some option and posting them soon, but, please, if you are starting to trade options be very careful. You can lose hard earned money. I have not had an option expire worthless in a long time. If a stock does not move in your direction you must not let your option go to zero. Picking direction is the toughest thing to do. And when buying options you need the stock to move in your direction fast. If it doesn’t, get out! Please read my page Buying Call Options.
Not for Grasshoppers
When I think of something I want out of options, or if I’m trying to solve a problem, I put my thinking cap on. I get this from coaching basketball. I truly think most basketball coaches can be good option traders.
You’ve been reading about my Triple Play Hedge. I thought of this strategy because I was trying to solve a problem. The problem of paying for hedging. Please read the page and see how I get hedging without paying for it. I actually get paid for the hedging. I thought of it! It’s my invention. Some people may not like it but I love it! I have a Triple Play Hedge position going right now.
This week I was trying to solve another problem. The problem of covering Naked Calls. Buying stock can be very expensive, so you can only sell so many Calls. Especially in an up market. In a down or sideways market you can get away with Naked Calls. In an up market it’s too dangerous. If you sell 10 contracts on a $50 stock and want a Covered Call, you have to buy the $50 stock. That’s $50,000! It’s the safest strategy and you can make some nice money but if you’re a new trader, how many of these can you do?
This week I came up with a strategy that solves this problem. And I tried my new strategy with Micron (MU). I sold a 10 contract Call which started as a Naked Call. With the stock at $45 I sold 10 contracts of the MU 1/17/20 $50 Call. This will not expire until January. I received a premium of $3.50 for $3500. You normally cover a Call with a stock, but with this Call I covered with the right to buy the stock. I did this by buying an option to buy the stock. I bought 10 contracts of the MU June 19, 2020 $45 Call. I bought this option for a premium of $7.50 for a total of $7500. If needed I can exercise this option and buy the stock, if I wanted to cover the Short Position (selling the Call). I don’t think I will ever make that move, least I hope not. But I am covered. I feel the big benefit is I didn’t’t have to buy the stock at $45, which would be $45,000 on a thousand shares. This is the problem I was trying to solve. I have more money in my account and available to trade with. Plus, if working on margin there is no margin interest. I love this strategy!
Along with my Triple Play Hedge, I think I came up with another brilliant move. NOT! There are hundreds of options strategies and plays. I decided to do a little investigation. I said this is a great strategy, someone must have done it. Well, I found a strategy called a “Bull Call Spread.” This was very close but not exactly what I did. The Bull Call Spread has a Call bought and sold but at the same Strike Price. After reading a little more I found what I did. Selling a Call and buying a Call with a further out in time Expiration Date and a lower Strike Price. I sold my Call to expire 1/17/20 with the Strike Price of $50. And bought my Call further out to 6/19/20 with a Strike Price of $45. With the different Strike Prices this move is called a “Diagonal Bull Call Spread.” I’m sorry to inform you that this in NOT my move! And I cannot take credit for it. lol
I said earlier I hope I never have to use this Long Call to cover my Short Call. Let’s go over the reason I say this.
If I exercise my right to buy the stock with this bought Call I will not recover my $7500 I paid for the Call. If the stock approaches my $50 Strike Price I will opt to buy the stock then. If this happens I’ll hold that Covered Call position until expiration. I’ll keep my $3500 premium for selling the Call and what ever I make on the assignment of the stock I bought. As far as the Call I bought to initially cover the Call, this will increase in value with the stock going up. I probably will never exercise to buy the stock but end up selling the option and taking the profit that way.
I titled this story “Not for Grasshoppers.” As you can see, if you’re not a seasoned options trader, it can get confusing. This is a learning blog and most readers might not have much experience, but some might have a lot. Either way, it’s good to learn the potential of this great money making field.
The Diagonal Bull Call Spread I did this week I didn’t report. I wanted to try to explain it before I posted the trade. However, it is listed in my Active Positions. Below are the 2 trades I made to complete my Diagonal Bull Call Spread.
Buy to Open 10 MU 6/19/20 $45.00 C @ $7.50 ($7500)
Sell to Open 10 MU 1/17/20 $50.00 C @ $3.50 (+$3500)
This is a long term position but I think I have the potential to make some nice money. I’ll be reporting along the way.
A Diagonal Bull Call Spread is a neutral to bullish strategy, for a stock you feel will go up slowly. For the Call I bought, I want the stock to go up. For the Call I sold, I want the stock to go up but go up slowly. I don’t want the stock to reach my Strike Price too much before Expiration.
The way to lose with this strategy is if the stock tanks down. I would lose the $7500 premium paid for the Call. But keep the $3500 premium I received for the Call sold. The total loss possible with my Diagonal Bull Call Spread is $4000. Clearly I don’t think that will happen. My biggest fear is the stock going up too fast. But this would be great for the Call bought.
I hope this makes sense! lol
Have a great weekend. Any questions, send an email.
Steve
The Options Coach