Today is Good Friday and the markets are closed. I will not be near my computer for the rest of the holy weekend so I wanted to get this week ending report done before I go away for Easter.
I had one trade come to a conclusion this week and this trade carries a very important lesson for Grasshoppers. The lesson is on Roll-Outs. Please read my page on Rolling.
This trade started on 4/6/17 with the selling of an 80 contract Covered Call on U.S. Steel (X). It was a 1 day Call (4/7/17) with the Strike Price of $33. I received a premium of 38¢ for a total of $3040. After I sold the Call the stock took off and went 80¢ above my Strike Price and stayed there until expiration. I didn’t want to get assigned and lose my stock so I did a Roll-Out. I rolled the Call out to 4/14/17. This entails buying back the Call I sold and selling another Call to expire the week later, which was Thursday because the market’s closed today, Good Friday. Yesterday the stock closed below my Strike Price and the Call expired. Take a look at all the trades involved in the Roll-Out, do the math, and you will see how the trade ended up a positive $3040.
4/6/17 – Sell to Open 80 X 4/7/17 $33 C @ 38¢ (+$3040)
4/7/17 – Buy to Close 80 X 4/7/17 $33 C @ 95¢ (-$7600)
4/7/17 – Sell to Open 80 X 4/14/17 $33.50 C @ 95¢ (+$7600)
4/14/17 – Expired 80 X 4/14/17 $33.50 C
Profit +$3040
Roll-Outs are a very important part of trading and making adjustment trades. If you are going to trade options you must understand Rolling.
Total Weekly Gain +$3040
If you have any questions on Rolling or when to use this strategy, send me an email.
Have a very Happy Easter or Happy Passover!
Steve
The Options Coach
With 80 calls does this mean you’re still holding 8000 shares of the stock? Are you waiting to sell more calls after the stock rises a little?
Hi David,
Yes I’m waiting for the stock to come up a bit before I sell more Calls. The stock is right at the 200 day moving average, I feel it might bounce off, as it did many times before. I think we might see X move up a bit, at least stop moving down. The 200 day moving average might be a support level. This is what I’m hoping! lol.
Steve
Good plan with the 200 day moving avg… just out of curiosity, do you ever exit some stock and in exchange sell Puts for premium (and possible delivery of stock if it goes lower to get a better avg price)? or just hold stock and wait to sell calls when the time is right?
I do not do the Put strategy you mention. I would normally hold the stock. However, at the moment I have Naked Calls on MU and I’m thinking of selling a Put and if I’m delivered the stock it would be a Covered Call. I really like MU so I wouldn’t mine covering on a dip. The premiums aren’t working for me right now.