If you have been following my resent trades with Micron (MU) you know what I’ve been doing. But I just added to that position so let me explain where I am now. Yesterday I did a Covered Call with MU. Because the company is reporting their earnings after the close today, I decided to sell another Call to bring in some insurance with the premium. This was done yesterday and at the end of the day I had a 50 contract Covered Call and a 50 contract Naked Call. Today, just a little while ago I decided I wanted a little more insurance because you never know what happens after the earnings report. To get that insurance I sold another Naked Call, so now I have a “Triple Play Hedge.” Please read about my strategy by hitting the link. It’s been working great for me and I hope it continues to not let me down today. This last Call was a 50 contract $19.50 Naked Call expiring next Friday the 14th. This is a Naked Call with the earnings report imminent so this trade gets a Risk Factor of 5. Before I show you the entire Triple Play Hedge here’s the Call I just sold:
Sell to Open 50 MU 10/14/16 $19.50 C @ $.22 (+$1100)
Below I’ll show the entire Triple Play Hedge. Please understand the entire play and each trade. To me this is an important strategy. It helps me accomplish what I want, which is hedging and getting paid for it. If you have any questions please email me.
Triple Play Hedge
10/3/16 – Buy 5000 shares MU @ $17.78
10/3/16 ($17.78) – Sell to Open 50 MU 10/7/16 $18.50 C @ $.35 (+$1750) (Covered)
10/3/16 ($17.82) – Sell to Open 50 MU 10/14/16 $19 C @ $.30 (+$1500) (Naked)
10/4/16 ($17.75) – Sell to Open 50 MU 10/14/16 $19.50 C @ $.22 (+$1100) (Naked)
Please remember, the dollar amount after the date of the trade, in parentheses, is the price of the stock when I sold the Call.
Notice I have my Covered Call expiring this Friday and the other two Naked Calls expire next Friday with the Strike Prices of $19 and $19.50. The earnings report comes out after the close today. As I write, the stock is at $17.75. With a good report I don’t think the stock will go above the $19 Strike Price over night because after doing some research I believe the stock never made a move like that before following an earnings report. BUT, anything can happen! If it’s a good report and the stock keeps moving up during the week, the $19 and $19.50 Calls gives me a little space to make some decisions if I’m contemplating covering both Calls. If it’s a bad report my three Call gives me some nice insurance while the stock moves down. It’s a great company. If the stock goes down I’m not worried it will stay down for long. It’s been moving great lately. We have about an hour and a half before the report comes out. I’ll be watching!
If you add up all the premiums you’ll see I have $4350 worth of insurance. I’m liking where I stand on this one.
Steve
The Options Coach