A little earlier today I sold a Covered Call involving Micron Technology (MU). As I wrote in that post, although I like MU I was a little concerned with that position because the company reports earnings tomorrow after the close. When news is due, you never know what’s going to happen. In that last post I reported I bought 5000 shares of the stock and sold a 50 contract Call. I bought the stock at $17.78 and sold the $18.50 Calls expiring this coming Friday. For a little hedge (insurance) I just sold another Naked Call. With this Call I went out one more week on the Expiration Date, 10/14/16. Plus I went up a to $19 on the Strike Price. If the stock ends up going down I now have two 50 contract Call which would increase in value on that decline of the stock. This is very similar to my “Triple Play Hedge” which would have one Covered Call and two Naked Calls. With this position I have one Covered Call and one Naked Call. Not as much insurance! If I decide I want more insurance I’ll sell one more Naked Call and this would become a Triple Play Hedge. This is a Naked Call on a stock with news imminent so this trade gets a Risk Factor of 5. Here’s the sell order.
10/3/16 – Sell to Open 50 MU 10/14/16 $19 C @ $.30 (+$1500)
Steve
The Options Coach