With NFLX at $103.90 I sold 5 more contracts of NFLX Calls. These are Naked Calls. At least I’m treating them as Naked Calls. I say this because I still own NFLX stock that I bought in January but I’m not using them to cover these new Calls. I do not want to loose these shares with assignment because I’m waiting for them to get up to my purchase price of $115. I’m holding them on the sidelines! So I do have the shares to cover these 5 contracts I sold today but I’ll treat these contracts like Naked Calls, meaning if NFLX goes above the $104 Strike Price I will cover these Calls by buying the 500 shares. Since I’m treating this trade as a Naked Call, I’m giving it a Risk Factor of 5. I give this trade a 5 because it’s a Naked Call and it’s only $.10 away from the Strike Price of $104. Basically it’s an At-the-Money Call. A Naked Call, At-the-Money is a very high risk trade and I do not recommend this type of trade anyone, let alone a beginner. There is 3 days to expiration so I’ll have to be glued to my screen. Because of the Risk Factor of 5 I only did 5 contracts where I normally do 10 contracts. Also because of the At-the-Money Call I got a very nice premium, $1.45. Here’s the sell order:
Sell to Open 5 NFLX 4/1/16 $104 C @ $1.45 (+$725)
Why did I make this trade you ask? Well the market has been moving great lately and it’s up again today. Also the FANG stocks (Facebook, Amazon,Netflix & Google) have been on a run and I do not think it’s going to continue. I don’t like to trade like this but I feel very strongly that NFLX is going to pull back a little.
As I write this post I keep going back to my trading screen to watch NFLX closely. I sold these 5 contracts with NFLX at $103.90 and it’s already down to $102.75 as I write. Since NFLX is so volatile I hope it drops below $102 to give me a little breathing room. If it does I might even jump out of these contracts with a profit as the premium goes down.
Please email any questions on this trade. You must understand what I doing to be an options trader.
Coachsjc@gmail.com
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Steve
The Options Coach