Friday 9/14 Trades

This post is reporting the trades I made yesterday. I had a hectic day and I didn’t get the chance to report the trades as I made them. I did have time to write a note reporting the trades, which I sent out but I didn’t have the time to write the particulars of the trades. I’ll try to clarify the moves and the reason for the moves now.

On 9/10/18 I sold a Naked Call involving Advanced Micro Devices (AMD). It’s no secret for the last 2 weeks I felt AMD was in a “over bought” situation and I felt there would be a little pull back (so far I’ve been very wrong on my prediction). The last few weeks I’ve been selling Naked Calls but ended up buying the stock to cover the Calls because the stock kept going up. The Covered Calls have been working great! I brought in some nice money and I was getting assigned. The Call I sold on 9/10 was also a Naked Call. However, this time when the stock went up I didn’t cover by buying the shares. I was so convinced the stock would pull back I decided to stay Naked even with the stock going above my Strike price. I felt the stock would drop back to below my Strike. Well, expiration Friday came (yesterday) and the stock was still In-the-Money. In the middle of the trading day I knew I had a problem. I gambled and I was losing this bet! The stock was moving between $31.50 and $33. Well above my Strike Price of $29.50. When I sold the Call the premium was at 60¢ and I received a $600 premium for my 10 contracts. Yesterday, finally giving up on the thought of the stock dropping below my Strike, I was thinking how I was gonna play this. Instead of doing a Roll-Out I decided to just get out with a loss. I entered a “Buy to Close” at a $3 premium. As the stock fluctuated I was filled. I sold the Call and received $600 and it cost me $3000 to end the deal, giving me a $2400 loss. As you know, I don’t like doing this but I’m having a great year and I decided to take the loss instead of locking up the money for a while with a Roll-Out.

 

9/10/18 – Sell to Open 10 AMD 9/14/18 $29.50 C @ 60¢ (+$600)

9/14/18 – Buy to Close 10 AMD 9/14/18 $29.50 C @ $3.00 (-$3000)

Lose -$2400

 

At this point I no longer had the obligation of delivering the stock at $29.50 but had a $2400 loss. As the trading day got a little older I was looking for a deal to make back some of the money I just lost. With AMD dropping back to $31.50 I decided to buy 1000 shares. I was hoping to get $1 out of the stock before the end of the day. If not, I would just hold the stock until next week. The stock started moving up. It went all the way up above $32.50. When it hit the point where I was up $1, which would be a $1000 profit, I contemplated selling. I decided to watch a little longer to see where it would go. The stock got up to $32.80. I looked at the $32.50 Calls, which would expire in a few hours, and the premium was at 50¢. I started thinking; if I was willing to sell the stock at $32.50 for the $1 profit, why not sell the $32.50 Call and bring in a $500 premium. With the stock at $32.80 I sold the $32.50 In-the-Money Call and brought in the $500. I also felt If I sell this Call there was good chance I’d be assigned, which I would like. When the market closed the stock was at $32.72. I was assigned at $32.50. I made $1000 on the stock and I keep the $500 premium. This trade didn’t make up for my loss on the Naked Call but it sure did make me feel better ending the week making back $1500 in a few hour trade.

Advanced Micro Devices Covered Call

9/14/18 – Buy 1000 Shares AMD @ $31.50

9/14/18 – Assigned 1000 Shares AMD @ $32.50

Profit $1000

 

9/14/18 – Sell to Open 10 AMD 9/14/18 $ 32.50 C @ 50¢ (+$500)

9/14/18 – Expired 10 AMD 9/14/18 $32.50 C

Profit +$500

 

Watch for my “Results Week Ending 9/14/18.”

 

Steve

The Options Coach