I am at our destination on our memorial motorcycle ride, Key West, Fla. Having said that, this is probably not the best time to be making this post. But keeping up with my dedication to “Main Street beats Wall Street” there are a few things I must report before I get back to the group I’m riding with.
If you look at the post I made on April 11th, I sold 50 Naked Call contracts of U.S. Steel. I sold the $17 Calls expiring yesterday. I did bring in a $4000 premium BUT the problem is the stock went up to over $19. As you know, me selling this Call obligates me to deliver the 5000 shares at $17. Since it’s a Naked Call, if I deliver the stock I would have to buy it at the current price and sell for $17. That would be a big lose which I don’t want to take. I had to make an adjustment move. As I say in many places in the blog, the road to success is not always a smooth highway. Many times you hit potholes and you must take detours. Well the detour I took to prevent me from taking a lose is called a ROLLOUT. This rollout is not for Grasshoppers and I did not complete my page on this subject yet. In an abbreviated explanation, I buy back the Call I sold at a lose, THEN I sell another Call at an Expiration Date further out in time so I’ll bring in another premium to get back on the positive cash situation. Here’s what I did. Originally I sold the $17 Call for a $4000 premium. With the stock going up I bought the Call back at a lose for $2.75 for a total of $13,750. At this point I would be down $9,750 because I brought in $4000 and spent $13,750. I would be completely out of that position. Now I sell another Call. I picked the 6/17/16 $18 Call. On the 50 contracts of another Naked Call I received $2.90 for a total of $14,500. I know for Grasshoppers this can get complicated and I’m sorry I don’t have time to explain it completely but I will as soon as I get home. The bottom line is I’m down $9,750 on one Call and up $14,500 on the other. If on 6/17/16 U.S. Steel is below the new $18 Strike Price I’ll be in good shape. Let’s see what happens. This trade will stay alive until June 17th.
On April 19th I sold 10 contracts of the FB 4/22/16 $113 Covered Call on a previously owned stock. It brought is a premium of $600. Yesterday the Call expired and I was not assigned because the stock closed below $113. I keep the premium and I keep the 1000 shares. Facebook’s earnings come out this week. This could be interesting!
Total profit +$600
AK Steel
On April 19th I also sold 50 contracts of AK Steel (AKS). This was a Naked Call but later in the week I covered the Call because the stock price was right around the Strike Price of $5. I bought the stock at $4.95. This Call also expired with the stock price a little below the Strike so I keep the premium and keep the stock. The premium on this Call was $1000. I’m a little concerned about this position because AKS has been on such a big run and they report earnings this Tuesday. I would love to see AKS stock go above $5 on Monday. I would sell the 5000 shares before earnings. I’m afraid of a drop this week!
Total profit +$1000
Total Weekly Profit +$1600
I must get back to my boys now! If you have a question about a Rollout before I do my page send me an email.
Steve
The Options Coach