I presently own 2000 shares of Advanced Micro Devices (AMD) and have a 20 contract Covered Call sold against these shares. This Covered Call has a Strike Price of $12. As I write the stock is at $12.20. I am set to deliver my stock tomorrow at the close if it stays above $12. I just sold another 20 contracts of the 3/16/18 $12.50 Calls. This expiration date is next Friday. For this Call I received a premium of 40¢ which is $800 on 20 contracts. Since I already have a Call sold against my shares, this will be a Naked Call. AMD has not been very strong lately so I’m hoping it falls below my Strike Price and there is no assignment. If that happens my new Call I sold today will become covered. If I do get assigned, I’ll stay naked because I don’t think it will get to $12.50. If the stock moves up to approach $12.50 and I’m naked, I’ll buy the 2000 shares back.
Sell to Open 20 AMD 3/16/18 $12.50 C @ 40¢ (+$800)
With this new Call I received a 40¢ premium which is a 3.2% return for a little over a 1 week trade. This is well above my “1 Week/1%” strategy. This trade will have a Risk Factor 5 until the close tomorrow. If I remain naked the Risk Factor will remain a 5. If I’m not assigned on my Covered Call, that Call will expire and the shares I own will cover this new Call and it will become a Risk Factor1.
Steve
The Options Coach