The way things went this week I didn’t hit my weekly goal of $3000 as per my “2017 Challenge.” I know I have the potential to do more every week so when I don’t hit the goal, I must say I feel like I let the readers down. Don’t worry, I’ll get over it lol. This year I am actually limiting what I make to teach the Grasshoppers discipline. I know that sounds crazy but I’m not a money hungry guy. I just want to be able to take care of my family, have a nice home, drive a nice car, go on nice vacations and have enough to donate to causes I truly believe in. I don’t need to work my tail off just to fill the bank with money to be there when I die. I don’t want to be the richest guy in the cemetery! This week I got caught up dealing with the snow here in NYC, my pizza joint, the basketball tournament, St Patty’s Day, etc. I also had a house guest the entire week. As far as my account, my position with U.S. Steel was well below where I purchased the shares so I was waiting for the stock to rebound a little. It did rebound a little and it made my margin buying power look a little better so I was able to get a late week U.S. Steel “Buy-Write” in to save the week from a no gain week. I’ll have weeks like this but I’ll make up for the downfall in the coming weeks.
This week I had 2 positions come to a conclusion. One with Tyson Foods (TSN) and the other was a “Buy-Write” with U.S. Steel (X). Both worked out great for me. Let’s start with Tyson Foods.
Last week I sold a 30 contract Naked Call on TSN. The entire week the stock went down and I was looking good for expiration. On Friday with the market up, TSN had a big rebound and my Naked Call was In-the-Money on Friday Expiration Day. I decided to not make a move on the position. If you hold a Naked Call position into the close on Expiration Day your broker has to deliver the stock for you. When they do this you end with a Short position, which for me was 3000 shares of TSN. The stock closed a little more than $1 above my Strike Price. Through my broker, I had to borrow the stock at $63.55 and deliver it for $62.50. I was down $1.05 on 3000 shares. When you borrow the stock you have to pay it back. Lucky for me, on Tuesday of this week the stock came back down and I was able to buy the stock for $62.55 and return it to my broker. My broker delivered the stock for the Strike Price of $62.50 so I ended up losing 5¢ on this position. Not bad! Plus I kept the premium from the sale of the option, $1500. This $1500 went toward last weeks gain and the 5¢ lose on 3000 shares ($150) goes toward this week. When you make a decision to do what I did you must the check to make sure the stock is not HTB (Hard to Borrow). If it is you might have to make a different decision. If you have any questions on how this procedure works send me an email.
Lose -$150
On Wednesday, with my margin buying power looking better, I was able to execute a “Buy-Write” with U.S. Steel. I bought 2000 shares at $35.90 and sold 20 contracts of the $36 Calls. This was a 2 day Covered Call. I received a premium of 75¢ for a total of $1500. The stock went up and closed on Friday at $37.29, well above my Strike Price. I delivered the stock and the 2 day deal was over. I made the $1500 premium and 10¢ on the stock for an additional $200. This trade brought in $1700 in 2 days. That’s a Rate of Return of 2.3%. I love it!
Total Gain +$1700
It’s clear if I didn’t sell the Call and only bought the stock I would have made a lot more money. The stock closed at $37.29 and I bought 2000 shares at $35.90. That gain would have been $2780 and not $1700. I only made the $1700 because I sold the Call option. I was obligated to deliver the stock at my Strike Price of $36. I would have made an additional $1080. This is called an Opportunity Lost. My long time readers know I do not care about this opportunity Lost. I’m not in this game to own stock, in fact I don’t like to. I’m in this game for the sale of the options and bringing in premiums. In the long run, I believe, the option sellers will do much better and have less risk. You just have to get over the Opportunity Lost. I’m up $1700 on the trade, I’m a winner! PERIOD!
Total Weekly Gain +$1550
A little short of my goal but I move on to next week. I feel a good one coming!
Have a great weekend! Enjoy the games.
Steve
The Options Coach