I saw a positive report on Tripadviser (TRIP) yesterday so I was watching this morning. Also this morning the stock received an upgrade from Cowen to market perform from underperform. The stock opened up about 80¢ (2.30%). With the stock at $39.20 I sold 10 TRIP 7/21/17 $39.50 Calls. I sold a Naked Call and just wanted to watch to see if it was gonna hold it’s gain, go higher or go down. In the small time the market was opened it looked like it wasn’t gonna go down so I decided to cover the Call and I bought 1000 shares to be safe. I got in at $39.40 and it’s hanging around that area. I’m hoping the stock continues up and I get assigned on Friday. This trade is a Covered Call so it gets a Risk Factor 1. This is a 3 day Call and I received a 40¢ premium on a stock I got for $39.40. That’s a 1.1% Rate of Return for 3 days.
Tripadviser Covered Call
Buy 1000 Shares TRIP @ $39.40
Sell to Open 10 TRIP 7/21/17 $39.50 C @ 40¢ (+$400)
You probably know by now I try to play the market to get 1 or 2% per 1 week trade. I feel if I stick with this strategy I’m being conservative. That’s 1 or 2% on the premium only. If I make a little on stock assignment my Rate of Return can go to 3, 4 or 5%, and possibly more. I’m an options trader so I like to get assigned. Many times I have an Opportunity Lost but if I’m making money I’m happy. If I change my strategy and try to get as much as possible out of a stock I believe I’ll lose money. I believe if I trade to NOT get assigned some of the stock will end up moving down and I have to hold and not make money on the money tied up with that stock. We all have to develop a strategy that works for us. This strategy is what works for me and fits into my risk tolerance. I look for deals where I feel I’ll get assigned. This means I pick stock that I feel will be higher than my Strike Price on expiration day. Picking your stocks and Strike Prices is very important!
Steve
The Options Coach