After holding Micron (MU) for a while, I made a mistake selling a Call where I was assigned below my buy-in price last Friday. Not only did I get assigned, but the stock continued up another $5. After watching MU for a long time, and the stock moving big in the last 2 sessions, I feel the stock will slow down in the next day or 2. I just sold 10 MU 3/9/18 $52.50 Calls for a premium of 50¢ ($500). With the stock at $50.80 when I made the trade this trade fits into my “1 Week/1%” strategy. Since I no longer own my shares of MU this trade is a Naked Call which is very dangerous! This trade gets a Risk Factor 5.
Sell to Open 10 MU 3/9/18 $52.50 C @ 50¢ (+$500)
This is a Naked Call so I’ll be watching MU very closely. If I have to buy the 1000 shares to cover this Call I will. As most readers know, Naked Calls are my favorite strategy. If this trade works out for me it will be nice to be back selling them. Naked Calls are not the best strategy when the market’s moving up and we all know how the market has been moving since Trump moved into the White House. If the market calms down, like it has been the last few weeks, you’ll see more Naked Calls from me.
With the stock moving up from where I made this trade. I’m going to place a “Buy-Stop” order for the 1000 shares at $52.25. This order will be filled if the stock gets up to $52.25 and my Naked Call will be covered. I don’t think the stock will get there but this is a safety order just it case the stock goes up and I’m not near my computer. This order was placed GTC (Good Till Cancel).
If you have any questions on this trade or the GTC order sent me an email.
Steve
The Options Coach