This weeks ending results can be very deceiving! I had one of my biggest week as a trader, as far as closing trades and cashing in the winnings, BUT! While I was putting money in my mattress I have put myself in an extremely high risk situation. Yesterday (Thursday) I sold 10,000 shares of GPRO and today I was assigned on my final 5000 shares of GPRO. GPRO has been on a huge run the last week and I owned a lot of shares. The sale of my shares and the assignment, while giving me big profits, left me with a bunch of Naked Call on a very hot stock. Why did I sell my shares you ask? Yesterday (Thursday) the market had a big day and GPRO had an even bigger day. With much talk of a correction coming I sold my stock thinking the market was going down today (Friday). Well the market did go down 131 but GPRO continued going up. This was not in my plan! I thought the market and GPRO were going to be going down. Picking direction is the most difficult thing to do. These things happen and you cannot panic. You must roll with the punches and put your thinking cap on. AS a result of me selling my stock with GPRO on a big run this week, my weekly gain is $21,100. That’s not how much my account is up, it’s how much I put in my mattress. These deals are over! Sometimes your account will adjust up or down according to how your positions are doing but in this situation, this money is locked in! However, because I took the profit from the stock gains, now I have to deal with Naked Calls. I am holding a Leap with a $15 Strike Price, and I have the new “Triple Play Hedge” going with a $16 Strike for next week and (2) $17 Strike for the 2 consecutive weeks after that. This is a total of 4 Naked Calls. The first thing I’m hoping for is that GPRO drops a little in the beginning of next week.
If you have any questions on this GPRO multi-position fiasco lol, please email me. Also read “Main Street beats Wall Street” next week and watch the market to see how I negotiate my way out of this risky situation.
Let’s take a look at where the $21,100 figure came from. Believe it or not, every trade involved GPRO.
GPRO
On Monday the 19th I sold a 50 contract $17 Call on GPRO and received a premium of $.40 for $2000. This was one day GPRO didn’t move well. About a half hour later, the stock dropped to where the $.40 premium was down to $.20. I decided to buy back my Call to exit the position. I sold and received $2000 and bought the Call back for $1000 for a $1000 profit.
Profit +$1000
GPRO
A few weeks ago on Sept 6th I bought 5000 shares of GPRO for $14.40. On Friday the 22nd I sold 10,000 shares at $16.10 and this 5000 shares was a part of that trade. Bought for $14.40 and sold for $16.10, that’s a $1.70 profit on 5000 shares for a total gain of $8500. These shares were covering my Triple Play Hedge but I had another 5000 shares Covering my LEAP but I knew these shares could be used to cover the $16 Call if needed.
Profit +$8500
GPRO
For the other 5000 shares I just mentioned in the deal above, as part of the 10,000 shares I sold. I bought this 5000 shares earlier in the day yesterday, Thursday the 22nd for $15.90. When I sold the 10,000 shares for $16.10 these 5000 shares was a part of that deal. Bought for $15.90 and sold for $16.10 for a $.20 gain. This day trade profit was $1000.
Profit +$1000
GPRO
For the next deal, I had a Call expire. This was the last leg of my Triple Play Hedge. This was a 50 contract $16 Call and I received a premium of $.27 for $1350. This was the last deal for the TriplePlay Hedge. The entire Triple Play worked out and it is over.
Profit +$1350
GPRO
For the final deal of the week I was assigned shares on the last leg of my Triple Play. The shares I was assigned on were covering a LEAP but because I sold 10,000 shares of GPRO this week my last leg of my Triple Play were Naked. Since the stock went above my Strike Price of that last leg of the Triple Play, I was assigned on the last 5000 shares I owned which were bought at $14.15 and assigned at the $16 Strike Price. That’s a $1.85 gain on 5000 shares for a total gain of $9250.
Profit +$9250
What a crazy week profit wise but as I mentioned above, as a result of my stock sales I am now Naked on many Call.
Let’s see how this plays out!
Total Weekly Profit $21,100
Have a great weekend!
Steve
The Options Coach