Bought Yelp, Covered Calls

Risk1

If you read yesterday’s trade post you know I tried to do a Buy-Write with Yelp just before the close. I was executed on the Call but not on the buying of the stock. The call I was executed on was selling 50 contract of the Yelp 10/14/16 (this Friday) $41Call. I wanted to buy the stock At-the-Money but it went above the $41 mark and the market closed. This morning the stock was up about $.20 on a down day. It looked like it was going to continue up and go opposite the market. A little while ago it reversed and dropped below the $41 Strike Price. It went down to the $40.85 area and it looked like it was going to start up again. I bought the 5000 shares to cover my Call at $40.86. Now that I have a Covered Call I give the trade a Risk Factor a 1. When I only had the Naked Call the Risk Factor was a 5. Here’s the buy order:

Buy 5000 shares YELP @ $40.86

 

Now that I bought the stock the stock is continuing to head south. As I write it’s at $40.50. I hope I didn’t make a mistake with the purchase of the stock. Although I’m hedged pretty well. I have the Call I sold yesterday which brought in a $3300 premium (insurance). Plus I have a Naked Call sold which expires 11/18/16 for more insurance against the stock moving down. I feel OK!

 

Steve

The Options Coach

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