I just sold 50 contracts of AK Steel (AKS) Calls. I am very involved in U.S. Steel. As I watch U.S. Steel I also watch AKS. Today we are have a big up day which is a bounce from the Brexit fallout. After the worst 2 days since August many investors look at this as a great buying opportunity. Most stocks took a beating as a result of Brexit and are a levels investors like. With this bounce I really like the premiums AKS is offering. Right now the stock is at $4.36. I sold the 50 contracts of AKS 7/1/16 $5 Naked Calls. I received a premium of $.11. I know this doesn’t sound like a great deal but $.11 on a stock selling at $4.36 is a great Rate of Return. We are talking 2.5%! Where do you get that? You used to get that from a bank on an annual basis if you locked up your money for 3 to 5 years. I’m going to manage this trade closely and I’ll be getting this 2.5% return in 4 days. There is a little down side to this trade, I give it a Risk Factor of 5. I give the 5 because it’s a Naked Call and the price of the stock is close to the Strike Price. The only more risky trade I do is a Naked Call In-the-Money. I know if I watch it closely this trade will be fine. If it gets close to the Strike Price I cover this Call. As I write the stock is already down to $4.30. I want it to stay below $5. Here’s the sell order:
Sell to Open 50 AKS 7/1/16 $5 C @ $.11 (+$550)
Let’s keep an eye on this. The deal will be over this Friday!
Keep your questions coming! I love this game!
Steve
The Options Coach