Earlier today I wrote my Week Ending Results post. At the end of that post I mentioned I was gonna make some Grasshopper trades. Well, I was filled on 2 Buy-Writes and I was not filled on another.
I get a lot of emails from readers informing me that they don’t have the money to make the 5 or 10 contract trades I’m making and they’re discouraged. I’ve decided to do some Grasshopper trades to show how you can build your pot making trades with less contracts. These smaller trades I call Grasshopper trades. The trades I’ll be making are Buy-Writes. These are Covered Calls and if you’re a beginner your broker will allow you to do these trades.
When you do a Buy-Write you can enter the trade as one position, a Buy-Write, and only pay one commission. Sometimes I do it with 2 trades. I’ll buy the stock while it’s moving up and hopefully get a better premium with a second trade selling the Call. Sometimes it doesn’t work well. You get executed on the buying of the stock but then the stock goes down and you don’t get filled with a better premium.
Today I entered 2 Buy-Write Grasshopper trades, 1 with RH and the other with Nvidia (NVDA). I also placed a trade to buy 100 shares of Netflix (NFLX) in anticipation of the stock moving higher and then placing an order to sell a 1 contract Call option. With the NFLX trade it didn’t work in my favor. The stock moved down as soon as I bought the stock and I never got filled on my Call option. NFLX announced earnings after the close and the earnings were good so this might end up working in my favor tomorrow because the stock is up 6% in after hours trading. We will see what tomorrow brings and I will either just hold the stock or sell a 1 contract Call. Here is the buy order for my 100 shares of NFLX.
Netflix
Buy 100 Shares NFLX @ $313.10
My other 2 Grasshopper trades were filled. Below you will see the price I got in the stocks and the selling of the option.
Nvidia
Buy 100 Shares NVDA @ $229.50
Sell to Open 1 NVDA 4/20/18 $230.00 C @ $4.00 (+$400)
This trade will bring me $400 and if I get assigned there will be a additional $50 for a total of $450.
RH
Buy 100 Shares RH @ $85.80
Sell to Open 1 RH 4/30/18 $86.00 C @ $2.00 (+200)
This trade will bring me $200 and if assigned an additional $20 for a total of $220.
I call these trades Grasshopper trades because they are only 100 share positions and selling 1 contract. This is much less than my normal 5 to 10 contract positions. However, NVDA is a very expensive stock at $229 so this one will not be a normal Grasshopper trade. To buy 100 shares at $229.50 it cost me $22,950. Buying the RH at $85.80 only cost me $8580. This is a legit Grasshopper trade. With NVDA I brought is a $4 premium ($400) which is a 1.7% return for a 1 week trade. With RH I received a $2 premium ($200) which is a 2.3% return on a 1 week trade.
I think the Rate of Return is the important thing. If I make a 10 contract trade or a 1 contract trade the percentage of the return is the same. So if you don’t have a lot of money to invest you can still get a nice return on the money you can invest. I’m getting a 1.7% return in 1 week on $22,950. What is wrong with that? I love it! I’m also getting a 2.3% return in 1 week on $8580. Again, What’s wrong with that? Both of these trades were done as Buy-Writes which is 1 trade. The total commission for each trade was only $5.45. I’ll still make a nice profit.
Please read the next few week because I’ll be making a lot of Grasshopper trades. These trades should help show how beginners can get started and bring in some nice returns. Before you know it you will have a bigger pot.
Please email me any questions on Grasshopper trades.
I’m sorry for this late email. Earlier I didn’t have time to write this report because I had a basketball workout scheduled.
Steve
The Options Coach