This was a pretty good week for me, considering the week ended with the UK leaving the EU. On Thursday every professional was advising to stay fully invested with long positions because they were so sure the Brits were going to vote to remain in the European Union. Well, Wall Street can be beat! I decided to stay with my strategy and keep my existing short positions. I’m glad I did, when the vote came in the Brits voted to leave the EU and Friday the Dow dropped over 600 points. Let’s see how my week ended.
This week I exited 4 positions. 3 expired and 1 I bought my way out. The 4 positions involved Solarcity (SCTY), Yelp (YELP), GoPro (GPRO) and U.S. Steel (X).
Solarcity
After the close on Tuesday, Elon Musk announced he was putting in a bid to buy a struggling Solarcity. This news was not met with open arms by many Wall Street people. On Wednesday I sold a Naked Call and brought in a premium of $1700. Wall Street not happy with Musk’s plan, the stock was heading south which is great when you have a Naked Call. About an hour into the trade I was able to get out of this trade with a $800 profit. Whenever I can get out of a trade with half my potential profit in the same day I entered, I do! I did a “But to Close” and locked in my $800 and put in in my mattress.
Total Profit +$800
Yelp
On Monday the 20th I sold 10 contracts of the YELP $28.50 Calls to expire Friday. I brought in a premium go $500. It looked like YELP was going to go above the $28.50 Strike Price but with the Brexit and the market crashing Friday the stock dropped below and the Call expired so I kept the $500 premium.
Total Profit +$500
GoPro
On Tuesday the 21st GPRO was on the rise and I noticed a nice premium with an option expiring Friday. I sold 50 contracts of the GPRO $11.50 Naked Calls and got a premium of $.17. Thats $850 on 50 contracts (5000 shares). When you get $.17 on an $11 stock, thats a 1.5% Rate of Return in one week. I’ll take it! With the Brexit the stock never went over the Strike Price and the Call expired.
Total Profit +$850
U.S. Steel
The U.S. Steel Trade was the most important of the week. Not only because it had the largest profit but because it was the end of my Roll Out. Below I copied all the trades involved in the Roll Out so we can review. You must understand Rolling! Very important! With my Roll Out of X, I made a losing trade into a big winner. Brexit was also responsible for U.S. Steel not staying above my Strike Price.
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
6/24/16 – Expired 50 X 6/24/16 $17 C
On 6/6/16 I made the first trade. I sold 50 contracts of the $16.50 Calls and brought in $1150. Ay expiration the stock was above the Strike Price. I did a Roll Out. The Roll Out entails two trades. one a “Buy to Close” my Call and “Sell to Open” another Call with a higher Strike and a further out Expiration Date. The “Buy to Close” cost me $3500 so at this point I’m down $2350. Now I sell the Rolled Out Call and bring in $5150. Now I’m up $2800. This Call expired because of the big drop on Friday when the stock closed below the Strike Price of $17. The Roll Out made this a winning trade!
Total Profit +$2800
Weekly Total Profit +$4950
Please email me if you don’t understand any of these trades, especially the U.S. Steel Roll Out.
Great Week!
Steve
The Options Coach