Hi All, Let’s get this trading week started. Right now it looks like the 3 day weekend did the market some good or it’s just the “rollercoaster” market continuing down the same track. Let’s hope the little bit of good news out of China and Oil up a smidgin is a sign of a few good days ahead. Only time will tell!
As some of you might know I still own 2500 shares of Netflix (NFLX). The stock is down a bit, along with everything else from where I bought, as a result of the last 2 week market bloodbath. I love NFLX and I have no doubt it will return to where I bought it soon. There is a little news imminent on my favorite stock. Today after the close they announce their earnings. If you read my rules I try to never get involved in a trade with big news due out. Well I did sell a Call in my shares but I don’t consider this getting involved with news imminent. I already own the stock and I have no plan to sell until the stock gets up to where I bought. I figured if I own the stock I might as well bring in some premium while I do. Especially since the premiums are high because of the earnings due out. Right now the stock is at $107.75. If the stock has good earnings it can go up big. I don’t want to lose out on the possibility of the stock going up so I sold the $120 Calls with the Strike Price of this Friday. If earnings come out not so good, the stock will go down, but I would own the stock anyway. If the stock comes out with good earnings it can move big, so this is why I went out a bit, so even if the stock goes up above the $120 Strike Price I’ll still get the gain from the $107.75 present price to the $120 price. With 2500 shares that would be a nice gain. Things never work out the way you want them to but I’d love for good earnings and the stock fly to where I get assigned. Whether the earnings are good or bad I’ll keep my premium. With this Call I got the premium of $2.25. On 25 contracts (2500 shares) the total premium is $5625. Because I already owned the stock and I’m just sell a Covered Call on my shares I put a “Risk Factor” of 1. Here is the order.
Sell to Open 25 NFLX 1/22/16 $120 C @ $2.25
Grasshopper, I understand 2500 shares of NFLX is a very large position. I’ve been in this game a long time. Just remember it’s not the amount of money you bring in, it’s the percentage on your return. You can always find some great deals getting 1% or 2% a week. It doesn’t matter how many contracts as long as you get a good “Rate of Return” on your investment.
Steve
The Options Coach