This was a nice week with only having 3 trades come to an end. 1 with Advanced Micro Devices (AMD) and 2 with RH, all Covered Calls with assignment. This is a great week for Grasshoppers to learn. The reason I say this is because 2 out of the 3 trades were Grasshopper trades. I describe trades involving 100 shares and a 1 contract Call sold as a Grasshopper trade. This week’s trades will also be a great lesson in being disciplined and sticking to your plan. All of my trades this week gave me a decent size Opportunity Lost. Please read my page on Opportunity Lost. This is when you make a trade and make money, but you would have made more money if you bought the stock and didn’t sell the Call. Selling the Call gives you guaranteed money but sometimes limits your profit if the stock goes above your Strike Price. In all of my trades this week the stock went above the Strike Price by a large amount. However, I will stick to my plan! I make my money selling Calls. The most difficult thing to do in this “stock Market” game is to consistently pick the direction of the stock. If you could do that there would be no reason to sell Calls. Since I cannot consistently pick direction, I sell Calls! And consistently bring in premiums. When a stock involved in a Covered Call moves higher than you thought, you cannot be teased and stray from your plan. When it happens to me I make what I made and move on.
Another thing about this week involving 2 Grasshopper trades is I made the exact amount of profit as last week, $1620. I know I had bigger weeks and $1620 might not sound like a huge amount, but if I do that every week that’s over 84 grand for the year. I’ll take it! These trades are a great way for beginners to get started and bring in a nice profit while you learn. All of the trades this week made over a 1% Rate of Return for the week with the premium ONLY! With the stock gain my Rate of Return was up in the 3% area. These trades fit into my “1 Week/1%” strategy.
There’s not much explaining to do with my trades. They’re all Covered Calls and I was assigned on all the trades. If you have any questions you can send me an email.
RH Covered Call
8/14/18 – Buy 100 Shares RH @ $151.00
8/24/18 – Assigned 100 Shares RH @ $152.50
Profit +$150
8/19/18 – Sell to Open 1 RH 8/24/18 $152.50 C @ $3.00 (+$300)
8/24/18 – Expired 1 RH 8/24/18 $152.50 C
Profit +$300
Advanced Micro Devices
8/19/18 – Buy 1000 Shares AMD @ $19.48
8/24/18 – Assigned 1000 Shares AMD @ $20.00
Profit +$520
8/19/18 – Sell to Open 10 AMD 8/24/18 $20.00 C @ 25¢ (+$250)
8/24/18 – Expired 10 AMD 8/24/18 $20.00 C
Profit $250
RH Covered Call
8/20/18 – Buy 100 Shares RH @ $151.00
8/24/18 – Assigned 100 Shares RH @ $152.50
Profit +$150
8/21/18 – Sell to Open 1 RH 8/24/18 $52.50 C @ $2.50 (+$250)
8/24/18 – Expired 1 RH 8/24/18 $152.50 C
Profit +$250
Opportunity Lost: With both of the RH trades I bought the shares at $151 and I had a $152.50 Strike Price. The stock closed at $56.34. I sold the Calls for $2.50 and $3. In this particular case I didn’t have much of an Opportunity Lost because the premiums were so high. If I never sold the Calls and sold the stock at $56.34 I would have made $534 for each set of 100 shares bought. With the Calls sold, I made $450 and $400. The Opportunity Lost was only $$84 and $134. Not Bad! These were only 1 contract Calls. If they were 10 contracts it would have looked a lot worse. Take a look at the Opportunity Lost with AMD dealing with a 10 contract Call.
With AMD I bought the 1000 shares at $19.48 and had a Strike Price of $20. The stock closed at $23.98. Big week! This Opportunity Lost is a little different. With the selling of the Call I sold the stock at $20. If I bought the stock and never sold the Call I would have made $4.50 per shares. On the 1000 Shares, my profit would have been $4500! Since I did sell the Call my total profit was $770. Big difference! Oh well, I move on! And stick to my game plan.
Total Weekly Gain +$1620
Steve
The Options Coach