Yesterday I sold a 10 contract Naked Call on Micron (MU) with the strike Price of $51. When I sold the Call the stock was at $49.70. When I sold the Naked Call I placed a buy order for 1000 shares of MU at $51. I did that so if MU went up I would have my $51 Naked Call covered. Well today, on a down day, the stock went up to my $51 Strike Price and my buy order for 1000 shares was filled. I now Have a 10 contract Covered Call.
Buy 1000 Shares MU @ $51.00
When I sold the 10 contract Naked Call I gave the trade a Risk Factor 4; now that I’m filled on my buy order this Covered Call position is a Risk Factor 1.
Steve
The Options Coach