This morning I sold 20 contracts of Calls on previously owned shares of GoPro (GPRO). I’ve owned 2000 shares since the first week of the year and have been selling Calls ever since. This time, with the stock at $9.45 I sold the $11 Calls to expire on June 17th. GPRO has only been moving down and I really don’t want to get assigned. The shares are down about $8 from where I bought so I would like to continue selling Calls bringing is cash as premiums to make up for the lose in value of the stock. With the stock at $9.45 I went out to the $11 Strike Price to help prevent an assignment. I could have went with a $10 Call for a higher premium but my Strike Price and Expiration Date will help prevent assignment. Since I went out about a $1.50 from the $9.45 stock price, I had to go out to June 17th to get a decent premium. If you bought the stock today and sold this Call it would be a one month deal for a 2.1% Rate of Return. Not bad!
I give this trade a Risk Factor of 1. There’s not much risk here. It’s a Covered Call on a previously own stock. I feel the bigger risk is the stock going above the Strike Price and I get assigned; I would like to hold on to the stock. Here’s the option order:
Sell 20 GPRO 6/17/16 $11 C @ $.20 (+$400)
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Steve
The Options Coach