As you might know I am deeply involved in U.S. Steel (X). On June 6th I sold 50 contracts of the X $16.50 Calls and brought in a premium of $1150. After I sold this Call, all kinds of news has been coming out on the world steel suppliers, mainly involving the U.S and China. The stock has been moving all over the place but mainly up. The stock has been up as far as $18.50 as of late. This was not good for my $16.50 Call. As this Call came to it’s expiration and I was deep In-the-Money, I did a Roll out. You must learn about Rolling if you’re going to trade options. This is an important tool for managing trades by making adjustments trades. A Roll Out is an adjustment trade! Below I’ll show you all the adjustments trades I made to keep the position alive to insure I don’t lose money.
6/6/16 – Sell to Open 50 X 6/10/16 $16.50 C @ $.23 (+$1150) Closed – Rolled Out
6/10/16 0 Buy to Close 50 X 6/10/16 $16.50 C @ $.70 (-$3500) Closed -$2350
6/10/16 – Sell to Open 50 X 6/24/16 $17 C @ $1.03 (+$5150) Roll Out
On 6/6/16 you see the Call I sold for a +$1150. On 6/10/16, which was Expiration Day for that Call, I did a Roll Out. I bought back that Call to close that position for a -$3500 to be down a total -$2350. As part of the Roll Out I sold another Call with the Strike Price of $17 and brought in a +$5150. The problem is, I’m Naked in this position. A few minutes ago I solved that problem. With todays volatile market U.S. Steel dropped to $17. When it was at $17 I bought 5000 shares to cover my 50 contracts. Now, whether the stock closes today, above or below the $17 I keep the $5150 premium of the last Call I sold. If the stock closes below $17 my Call will expire and I keep the premium. And if the stock closes above $17, I’ll get assigned and I’ll keep the premium. With the stock hanging in the $17 area I’m in a very good position. Because of my Roll Out my total gain with the premiums will be a +$2800. This Call expires today! Here’s the stock buy order:
Buy 5000 shares X @ $17
At this point my only worry is U.S. Steel taking a big dip because of the Brexit. This is going to cause some big problems in the world. I just hope it doesn’t start today. Let’s watch. I think I’ll be shorting more positions.
Is today’s hit on the market a buying opportunity or the beginning of an unraveling?
Steve
The Options Coach