Cover AKS

Hi all, I’m not near the market too much today and tomorrow because I’m on another motorcycle trip in Fla. Me and about 20 friends do this trip every year. It’s a ride from Ft. Lauderdale to Key West. It’s a memorial ride for one of our friends who lost his life in a motorcycle accident 10 years ago. Right now I’m staying at a hotel in Ft Lauderdale and we leave on the ride in the morning. I’ll be back to Lauderdale on Sunday and back home Monday evening.

I’m watching my positions on my phone and just came up to my room to make a trade. Being involved in Naked Calls is not the safest thing when you’re not at the computer.

If you look at my post from 4/19 you will see I sold 50 Naked contracts of AK Steel (AKS). When I sold those Calls the stock was at $5 and I sold the Calls with the $5 Strike Price, an At-the-Money Call. This was a Naked Call so I gave it a Risk Factor of 5. This is a high risk trade! With the steel stock moving up for the last few months I felt they were about to come down. All week the stock was above $5 which put my Call In-the-Money. This had me a little concerned. Today the stock was moving above and below my Strike Price so when it was at $4.95 I decided to buy the 5000 shares and cover my Naked Calls. Now that I have a Covered Call I change the Risk Factor to 1. I still think the steel companies will have a pull back but now I hope that won’t start until Monday. I would like AKS to stay above $5 so I get assigned. If this happens I make $.05 on the stock sale ($250) and the $1000 premium for a total gain of $1250. If the stock stays below $5 and I don’t get assigned I’ll sell another Call.

I am still in the Naked position with U.S. Steel and it looks like it’s not going to work out so great. I have a $17 Naked Call expiring tomorrow and the stock’s at $19.70. This is not good! I will defiantly be doing a Roll Out move tomorrow. For you Grasshoppers who don’t know what that is, I’ll do my best to explain it when I make the trade. I did not complete my page on Roll Outs yet and will also try to get that done as soon as I get home.

Steve

The Options Coach