Today the market opened “up” but now has reversed and is down about 25 points. I’m really holding more stock than I like so I’m trying to get out of some positions with a profit while I free up some margin money. I hope to get in some new positions but sometimes I like to clear out some old positions. With this in mind I just bought to close a Naked position on Yelp. A few weeks ago I sold a 10 contract $40 Naked Call on YELP. This Call was to expire on 11/18/16 and I received a premium of $2.30 for $2300. Like I said, I want to set up my account to sell Call on the shares I’m holding to bring in premiums and get some hedging to protect my account if the stocks go down further. And that’s dealing with my margin account. This move might be hard to understand but this is what I’m comfortable with. I could have held the position for another 33 days to capture the entire premium but I decided to grab some profit and move on from this Naked position. This Call I sold for $2.30 and I just paid $1.70 to get out. This is a $.60 profit for $600 on the 10 contracts. Some weeks I can project what my profit will be. This week I do not think I’ll be putting much in my mattress. I’m happy starting the week with $600 but I don’t think it will be much more. Let’s see what I can do. Here’s the “Buy to Close” order:
Buy to Close 10 YELP 11/18/16 $40 C @ $1.70
Profit $600
Before I sell Calls on the stock I’m holding I want to see what the sentiment of the market will be for the week. All of my holdings are lower than where I bought. If the market is going to go up I want to wait to get a better premium with a Strike Price where I wouldn’t lose money if assigned. If the market is gonna go down I’ll have some tough decisions to make with the stocks or the Calls I sell. This is the main reason I don’t like own stock. This is all part of the game. Let’s watch to see what I do to protect my account. If you have any questions, send me an email.
Steve
The Options Coach