On Wednesday, March 28th I sold a 5 Contract Covered Call on RH. It’s the only trade I have to report for the week ending 3/29/18. This was a 1 day option because last week was a shortened trading week with the markets closed on Good Friday. Owning 2500 shares of RH, I only sold a 5 contract Call for a few reasons. One, the 500 shares I used to cover this Call I bought at $93.50. I could not risk the other 2000 shares at a Strike price where I could get a decent premium. The rest of my shares I bought for over $100 per share and this Call I sold with a $95 Strike Price. If I sold a Call with all my shares involved and getting assigned at $95 I would have taken a loss on the stock sale with assignment. Two, I wanted to reduce the size of my position by 500 shares so I entered this trade looking to get assigned. I picked a Strike Price of $95 because it had a nice premium, plus, the way RH is moving after earnings, I felt I would be assigned. Buying these 500 shares at $93.50 and getting assigned at $95 would give me a profit on the stock sale in addition to getting the nice premium.
This is just what happened with my only trade of the week. I collected a nice premium, made a profit on the stock sale and reduced my RH position from 2500 shares to 2000 shares.
2/14/18 – Buy 500 Shares RH @ $93.50
3/29/18 – Assigned 500 Shares RH @ $95.00
Profit +$750
3/28/18 – Sell to Open 5 RH 3/29/18 $95 C @ $1.50 (+$750)
3/29/18 – Expired 5 RH 3/29/18 $95.00 C
Profit +$750
I am very happy with the movement of RH after earnings. I was able to get out of 500 shares at a profit to reduce my position. Now if RH can continue to move up to where I can sell a few more Call and eventually get out of my remaining 2000 shares at a profit, it would be great!…… Stay tuned!
Total Weekly Gain +$1500
If you have any questions on my RH moves or strategy going forward, please email me.
Steve
The Options Coach