A few minutes ago I bought 1000 shares of Advanced Micro Devices (AMD) at $19.48. While I was watching the candlesticks chart I felt the stock was gonna start moving up. I got into the trade to make $500. If the stock gets to $20 I would jump out with my planned profit. Whenever I buy a stock I look at the Options Chain to see what the Calls are selling for. I looked at the $20 Call to expire this Friday and they were going for 25¢. I figured if I’m willing to sell my stock for $20 I might as well grab another $250 (25¢ X 1000 shares). If the stock got to $20 I was gonna sell. Now, if the stock is at $20 this Friday I’ll get assigned, make my $500, plus, put another $250 in my mattress while selling my stock at my desired price. If this happens my profit will now be $750. If the stock never gets to $20 I’ll still keep the $250. This is a Covered Call on a very highly rated stock so it gets a Risk Factor 1. This trade fits into my “1 Week/1%” strategy. The Rate of Return for the premium only is 1.2%. If I get assigned this Friday the Rate of Return for the Covered Call is 3.8%.
AMD Covered Call
Buy 1000 Shares AMD @ $19.48
Sell to Open 10 AMD 8/24/18 $20.00 C @ 25¢ (+$250)
Steve
The Options Coach