If you read “Main Street beats Wall Street” or you get my emails you know I have a Naked Call on U.S. Steel (X). Well, AK Steel (AKS) is also a steel company and moves pretty much the same as U.S. Steel. Both stocks have been moving up since February. I have a Naked Call on X because I feel there will be a pull back soon. I feel the same will happen with AKS. I hope I’m right because I just sold 50 Naked Call contracts on AKS. AKS is a much lower stock, selling at $5 a share. I sold the 50 contracts At-the-Money. I sold 50 AKS 4/22/16 $5 Calls and got a premium of $.20 for a total of $1000. I hope the stock does pull back and stays below $5 until the close this Friday. If the stock goes up I’ll buy 5000 shares to cover my Call and hope to get assigned because I don’t want to own the stock. I’m in it for a 3 day premium. If I don’t have to buy the stock it will be a “money for nothing and chicks for free” situation. If I have to buy the stock, the investment will be $25,000. With a $1000 premium, that will be a 4% gain in a few days. I give this trade a Risk Factor of 5. As I write, the stock is at $5, which is At-the-Money and it’s a Naked Call. An At-the-Money or In-the-Money Naked Call is a very dangerous trade. I don’t want to buy the stock right now because I think the stock is gonna pull back…..but I might have to! I’ll let you know. Here’s the option order:
Sell to Open 50 AKS 4/22/16 C @ $.20 (+$1000)
Steve
The Options Coach