GPRO Trouble

I thought I was going to spare you from an email today because I didn’t make any trades. Then I was tempted to write toward the close because it was such a bad day. The 3 major averages are down over 7% so far for 2016. But I fought off the urge. After the close GOPRO’s trading was halted and that’s usually not good news. While I was waiting to hear what was going on with GPRO I said to myself, “I guess I”m going to have to write about some bad news.” Well, here I am writing! The news GPRO had for the market was they were announcing a bad outlook for the company and they were going to have big layoffs. This is never good for the stock price. The trading was halted at the close, meaning there would be no after-market trading until 4:40pm. The stock had an OK day on a very bad market day. The stock was up .01 while the entire market was down except for a very few stocks. GPRO trading started up again and the stock is getting crushed. The stock closed at $14.61 and in the after-market it’s down to $11.30. And it will get worse in the morning at the open. The reason I’m so concerned is because I still own 2000 shares. On Jan 4th, the 1st day of the trading year I sold 10 contracts of the Naked Calls. I sold Naked Call because I didn’t want to own the stock. I always think GPRO is going down. I sold the Call with the stock at $18.50, a Call with the Strike Price of $20 and a 1 week expiration. I figured the stock would never hit $20 in 1 week. On the next day, Jan 5th the stock started to run up. It went all the way up to $19.80. I could not believe it and I didn’t like it. I did not want to own GPRO but if it continues up I’ll have to cover my Naked Call. At $19.89 I bought 2000 shares to turn my Naked Call into a Covered Call. The stock went all the way up to $20.60. In the next few days the stock pulled back and the Call expired on Friday. I kept the premium of $520 and now I still own GPRO.

Now What do I do? Well, right now I plan on just hanging in there and see what happens. Who knows, maybe a bigger company like Apple will buy them and the price will go up. I’ll just have to wait and see.

GPRO is not the only stock I own that’s going down. I also own NFLX and FB. Both took hits today. I’m not really worried because I love both of these companies. Even tho I love the companies doesn’t mean they’re not going to go down further. It’s time like this you need to have a strong stomach. It’s all in the risk tolerance. If you want to be in this game you must be able to handle the lows with the highs. I’m in pretty good shape because I had a very good week last week. Also the stocks I own I have Calls sold. It’s a little hedging, so as the stocks go down I make up a little of the money with the premium value going up. This is something you have to understand when you sell Short Calls. Very important to understand Time Decay and how you benefit from it.

Well last week was great and this week the stocks are taking a beating. But even at the end of this week I’ll be taking in some nice premiums. The bottom line is I don’t like owning stock! Some times it’s hard to avoid but I might have to try harder!

Let’s see what tomorrow brings.

 

 

Steve

The Options Coach

1 comment on GPRO Trouble

  1. Soros came out today and is predicting it could be 2008 all over again. That would be ugly and the economy is not strong enough currently to handle that type of hit. Armageddon could be around the corner – Problems in China, the political race, the news isn’t good.

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