Earlier in the week I wrote about doing some Grasshopper trades to show beginning traders that you can make money even if you don’t have much money to start with. A Grasshopper trades is trading with smaller amounts of stock. When I do a Grasshopper trade it will be dealing with 100 shares of stock and not 500 or 1000 shares. The big thing I’ll be looking for is the Rate of Return. I’l be looking for a 1% return for a 1 week trade. I have a page you can read. It’s called “1Week/1%.” If you invest $100,000 and make 1% or if you invest $10,000 and make 1%, it’s the same thing. Yes the person investing the $100,000 will make more money but if you don’t have $100,000 you can only invest what you have. You will still be getting the same Rate of Return. If you make 1% a week, well, do the math!
Earlier in the week I bought 1 shares of Netflix (NFLX) at $313.10 with the intention of selling a one contract Call. I bought the shares going into earnings. I felt the earnings were going to be good so I held off on selling the Call until the stock went up a little. The earnings were good and the stock went up $20. With all good news coming out about NFLX I decided to buy another 100 shares at $333.85. Today with the stock at $335 I just sold a 2 contract Call with the strike Price of $345. This Call will expire next Friday and I received a premium of $3.10 for $620 on the 2 contracts. This premium is a little under the 1% I desire. I decided to go with a higher Strike Price because it’s a hot stock. I could have went with a lower Strike Price and got a premium over the 1% but I wanted to have the potential of making more on the stock if assigned. This trade is a Covered Call on previously owned stock so it gets a Risk Factor 1.
Sell to Open 2 NFLX 4/27/18 $345.00 C @ $3.10 (+$620)
I understand if I sold a 1 contract Call on NFLX it’s not a legit Grasshopper trade. Today 100 shares of NFLX will cost $33,500. This is a lot of money! I’ll be doing more 1 contracts trades that will be much less money.
If you have any questions on this trade or any other trade send me an email.
Steve
The Options Coach