It was a pretty simple week with only 1 trade. I was trying to get something done with RH but it really didn’t do much this week. After a crazy jump last week I guess a lot of people were just sitting back and watching. I did the same.
Netflix (NFLX) is another stock on a huge run. I hold 300 shares and with the stock closing at $411 this week it’s a very large investment. I hold 100 shares in my Trading Account for my “Gift Account.” The other 200 shares are also in my Trading Account but they are for trading.
With the stock moving up big in the last few week I decided to sell a Call on the 200 shares. On Tuesday with the stock at $404 I was looking at the Strike Prices to pick one where I felt I wouldn’t get assigned. I decided on a 4 day Call with the Strike Price of $415. You know the stock can go anywhere in 4 days but I liked $415 Call. It was still $11 Out-of-the-Money and it had a premium of $3. On the 200 shares, or 2 contracts, the total premium was $600. I bought into these shares at two different times. 100 shares at $313 and the other 100 shares at $333. I felt that if the stock went above my Strike of $415 I’ll make a nice profit on the stock and I’d bring in a $600 premium, which is nice.
After being in the Call for 2 days the stock went up to $420, WILD! However, it did drop back down and closed the week at $411.09. I was not assigned, I keep my stock and I keep the $600 premium. This money is in my mattress!
6/19/18 – Sell to Open 2 NFLX 6/22/18 $415.00 C @ $3.00 (+$600)
6/22/18 – Expired 2 NFLX 6/22/18 $415.00 C
Profit +$600
That was the only trade of the week. Nothing like last week but it’s still nice making $600 in 4 days. I will never complain with that.
Total Weekly Gain $600
I’m gonna be changing my trading strategy a bit after next week. We have 1 more week of trading in the 1st half of the year and I’m gonna try hard to keep all of my profits. I had a great 1st half and I want to hold on to all of it. I’ll be writing about this and my 2nd half strategy after next weekend.
Enjoy the weekend!
Steve
The Options Coach
Hello Steve.
Do you have any thoughts on why you did not get assigned on NFLX since during the week the strike price of $415 was reached. Curious as to why the buyer of the option did not exercise the right to purchase the stock at $415.
Netflix actually hit $420 during the week.
An American option CAN be exercised any time before expiration day, however, the vast majority of option buyers wait until expiration day to make a move. I have been assigned before expiration day but not too often. Since most option buyers are in the game for the gain in the premium and not actually to buy the stock, most will do a “Sell to Close” to get their profit and not buy the stock. I bought many options in my days trading and not once did I ever exercise my right to buy the stock.
Another reason is, if an option buyer is in the game to own the stock he might as well wait until expiration day to see where the stock might go. Hold out as long as possible. Why buy early if the stock might go down? If the stock continues up, he would still get that gain. Also, if he was going to buy the stock just to sell for the profit, he can just do the “Sell to Close” and make the same profit with laying out the money to buy the stock.
I hope this helped.
Steve