Today I have two options expiring. One is a 100 contract $20 Put on U.S. Steel (X) and the other is a 30 contract $39 Call on Yelp (YELP). I hope I’m not speaking to early, but it looks to me like these two options will expire without and stock changing hands. As I write X is at $20.85. At this point, I don’t think the holder of the Put I sold will exercise his right to sell me 10,000 shares of X for $20. Again, anything can happen, but I feel with the strength X is trading today it will not go below $20 today. However, there is still 5 hours to the trading day!
Today Yelp is also trading strong and the stock is up $.65 as I write. The stock is at $37.95. I do not think Yelp will get to $39 where I’ll get assigned on my Call. I own 5000 shares and with this Call I sold is 30 contracts. If these 30 contracts expire today as I feel will happen, I’ll have 5000 shares available to sell a Call against for next week.
Feeling the way I do about these positions I’m holding, I just sold a Call on Yelp to expire next Friday. The way I feel about these positions I hold is very important. If I was put the 10,000 shares of X it could cause a margin problem. Buying 10,000 shares of X at $20 would come with a $200,000 bill. Having said that,I just sold 50 Contracts of the Yelp $39 Calls expiring 9/2/16. I brought in a $.45 premium for a total of $2250. I own the 5000 shares so this is a Covered Call. A Covered Call on previously own stock is a low risk trade. I give this trade a Risk Factor of 1. Here’s the option order:
Sell to Open 50 YELP 9/2/16 $39 C @ $.45 (+$2250)
Please take a look at my “1 Week/1%” strategy. This is a strategy where I look to get a Rate of Return of 1% for a 1 week trade. This 1% is on the premium only. If I get assigned on this option my return will be higher because I’ll also make money on the stock.
I made a little change to the way I list my Order Form in my Active Trades. After I list the date of the trade, in parenthesis, I’ll be listing the price the stock was at, at the time of the trade. For example, this trade was made on 8/26/16 and the price of Yelp was at $37.95 at the time of the trade. The trade will be listed as follows:
8/26/16 ($37.95) – Sell to Open 50 YELP 9/2/16 $39 C @ $.45 (+$2250)
As you see the order form is exactly the same except I added the price of the stock at the time of the trade. I think this will be useful information for both you and I. When you are studying and looking at my Active Trades, it will be good to see the price of the stock at the time of the trade. This change (price of stock) will only be in the Active Trades. It will no be in the order form when I post the trade and it won’t be in my Trade History, only Active Trades!
If you have any questions, send me an email.
As I was writing the market made a reverse! X is falling ! And I might get put the stock after all. It’s down to $20.15. No major deal! I hope lol. I’ll deal with my margin account. Yelp is falling with U.S. Steel so if I get put the shares of X I won’t get assigned on Yelp so my Calls for next week will remain covered. I’ll keep you informed!
Steve
The Options Coach