I sold two Naked Calls on Yelp (YELP) expiring today. Both 10 contracts Calls. One I got into on 5/19 and the other on 5/23. Since today was expiration day, I had to make a move on both because they were both In-the-Money. Let’s take a look at one at a time to see the result.
Earlier in the week I wrote that Yelp was in a Raising Wedge pattern on the candlestick chart and I felt the stock was going to move down this week. Well, it didn’t move as I expected and went up a little more. I still feel it’s in a Raising Wedge pattern but not as defined as it was. When you watch candlestick charts, it never moves exactly when you think. Sometimes it takes a few days. I still feel it will pull back but today I had to make a move on my options because of Expiration Day.
For my first Naked Call I sold 10 contracts of the 5/27/16 $25.50 Calls for a premium of $.45 (+$450). Today I was hoping the stock would drop below the $25.50 Strike and expire worthless but it hung tough and closed at $25.86. Right before the closing I bought my way out to close this deal. I paid $.37 to close and made a few bucks. Here’s the two orders to get in and out of the Call:
Sell to Open 10 YELP 5/27/16 $25.50 C @ $.45 (+$450)
Buy to Close 10 YELP 5/27/16 $25.50 C @ $.37 (-$370)
TotalProfit +$80
Not great but if I don’t lose money I’m happy!
For the second Naked Call I sold 50 contracts of the 5/27/16 $25 Calls for a premium of $.65 (+$650). This one was in a little different position. The first Call I was able to buy my way out with a small profit, this one I would have lost money because it was a little more In-the-Money, so I did a Roll Out. You must understand what Rolling is. It’s an adjustment trade used very often. What I did was buy back my Call and sell another Call with a Roll Out. Here’s the order forms of this move:
Sell to Open 10 YELP 5/27/15 $25 C @ $.65 (+650) Closed – Rolled Out
Buy to Close 10 YELP 5/27/16 $25 C @ $.87 (-$870) Closed
Sell to Open 10 YELP 6/17/16 $26 C @ $1.00 (+$1000) Roll Out
This position will stay open until expiration date of 6/17/16. I went out three week which I’ll explain why in the results week ending 5/27/16. The first position is closed. These two positions didn’t work out the way I wanted in the time frame I wanted. Let’s watch YELP next week to see if the Raising Wedge was a reversal indication. If you look back at the Raising Wedge I posted on U.S. Steel, it was a reversal indicator. U.S. Steel went from $18.70 at the end of the Wedge all the way down to the $12.70 area. Check out the candlestick chart from May 9th to about the 20th. I feel the same is going to happen to YELP.
Have a great Memorial Day weekend. Let’s remember it’s not about the hot dogs and beer. May God bless those who died for this country, spilling blood all over the world. They not only fight to keep us free. They fought and died to free, and keep free millions of people from many countries, while spreading the beautiful American way. I truly feel Memorial Day for the U.S. armed forces should be celebrated all over the world. I don’t think we should hold our breath waiting for that to happen! We, here in this country know what they did. Let’s celebrate their lives. NEVER FORGET!
Watch for my weekly results tomorrow.
Steve
The Options Coach