I’ve owned 2000 shares of RH which I’ve been selling Calls against every week. In addition to these shares, last week I did a 5 contract Buy-Write where I bought another 500 shares and sold a 5 contract Call. I did this Buy-Write very close to At-the-Money because I wanted to get assigned. I went into the Buy-Write for the premium only, and maybe make a few dollars on the stock sale. I did not get assigned so I ended the week keeping the premium but I now owned 2500 shares of RH, a little more than I wanted. RH earnings are coming out tomorrow. I’m now in a situation I really don’t want to be in, owning 2500 shares with a huge news item coming tomorrow. If the earning are good the stock goes up, if not, the stock goes down. It’s the type of gambling I don’t like to do at this point of my career. I cannot get out of this 2500 shares position because they are at a price below where I bought. I do like the stock and it has a “strong buy” rating by Zack’s, so I’m gonna ride it out. The stock is up almost $3 today and the premiums are very high because of earnings. The shares I bought with the Buy-Write I got for $93.50. Last week I brought in a $1000 premium and a few minutes ago I sold another 5 contract Call for a premium of $3 for another $1500. This is a 3 day Call with a Strike Price of $95. If the earnings are good I’ll keep my $1500 premium and hopefully get assigned at $95 to make $1.50 on the stock sale. I’m praying for RH to beat the street’s estimates. Since I already own the shares and I’m not going to sell, this Covered Call trade gets a Risk Factor 1.
Sell 5 RH 2/23/18 $95 C @ $3.00 (+$1500)
I still own the other 2000 shares and I hope to get a Call sold with a nice premium. I’m in these shares at an average price of $102, so I’m hoping the stock goes up a bit more so I can get at least a $1 premium for a $102 or $103 Strike Price.I have until tomorrow before the close to get the Call sold because the earnings report comes out after the close tomorrow. The premiums will stay high until after the report.
I’ll let you know as soon as I get the 20 contract Call sold.
Steve
The Options Coach