RH is both the name of the company and it’s ticker symbol. Formerly Restoration Hardware Holdings, Inc., is a luxury retailer in the home furnishings marketplace. The Company offers merchandise assortments across a range of categories, including furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and child and teen furnishings.
On Friday, March 17th I sold 30 contracts of Naked Calls to expire 1 week later, which was yesterday. My Naked Call was going great until yesterday, Expiration Day, when it went above my Strike Price of $36.50 and stayed higher until closing. I was in the same situation a week ago with Tyson Foods. My dilemma was, should I do a Roll-out, or should I hold the position past closing on Expiration Day? If I hold the position, as I did with Tyson Foods, my broker would deliver the stock to the Call buyer at the Strike Price, which would be borrowed shares putting me in a Short position. It worked out great with Tyson and I feel RH could go down next week which would be great with a short position.
I decided to hold my position and the stock was delivered. I now have a short position of 3000 shares of RH. When I sold the Call I received a premium of $2400, which is in my bank. This RH deal will not be over until I buy 3000 shares of RH and and replace my borrowed shares back to my broker. The stock closed on Friday at $36.93. I am hoping on Monday the stock tanks and at least goes below the price I delivered the shares at, $36.50.
If the stock goes down to $36.50 and I buy 3000 shares, this deal is over and I’m up the $2400 premium.
If the stock goes down below $36.50, I will now start making money on the stock. Let’s say the stock goes down to $36 and I buy the stock. I would make 50¢ on 3000 shares which would be $1500 in addition to the $2400 premium.
If the stock goes up, I’ll have to see how long I hold on. As the stock goes up I’ll be losing money on my short position. As the example above, instead of going down the stock goes up, if the stock went up and I bought the 3000 shares at $37 I would lose 50¢ which would be a $1500 lose cutting into my $2400 premium profit.
Let’s watch and see what Monday brings. I’d love to see RH go down to $35 lol. Wouldn’t that be nice!
If you have any questions on my RH trade please email me. You must understand how this type of trade works.
Watch for my “Results Week Ending 3/24/17.” I’ll get it done sometime between now and Sunday night. I have a lot of basketball to watch.
Have a great weekend!
Steve
The Option Coach