I was just filled on a Micron (MU) “Buy-Write.” Mu received an upgrade this morning and I wanted to bring in a little money while it’s moving. Some may think I have conflicting positions because yesterday I bought a Call with MU and today I sold a Call. Well, I don’t claim to be the sharpest guy but I do say I know how to bring money into my account. And I think both of these positions will make money for me. One thing that can throw a monkey wrench into my money making scheme is the Fed giving us a surprise tomorrow. The market is expecting a one quarter point reduction in the prime rate. If Powell decides that he had enough with Trump trying to intimidate him into this reduction, and decides to leave rates alone, it can cause a huge pullback in the market. The Fed is suppose to be completely independent and Trump is making his opinion well known that he wants a big rate cut. Maybe trump is calling for a “big” rate cut so if Powell makes a small, one quarter point cut, he let’s Powell “save face” and send a message that he is in charge of the rate issue. Whatever is going on in the minds of these 2 guys, who knows? But I hope there is the predicted cut. If not, this would be the monkey wrench I talk about.
Today’s trade was a “Buy-Write.” I bought 1000 shares of MU at $47.15 and sold 10 contracts of the MU 8/2/19 $48 Call. This Call brought in a premium of 62¢ for $620.
Buy 1000 Shares MU @ $7.15
Sell to Open 10 MU 8/2/19 $48.00 C @ 62¢ (+$620)
What do I hope happens with this stock so I make money with the Call I bought yesterday and the Call I sold today? I hope the stock goes up above my Strike Price of $48 and I get assigned. If I get assigned I’ll make $850 on the stock sale and I’ll keep the premium from the sale of the option, which is the $620. If it does I’ll make a total of $1470 on the “Buy-Write.”
If the stock goes up to the point that I get assigned I’ll make money with the long Call I bought yesterday. Right now the stock is up to $47.50 as I write. I will definitely be in my “Buy-Write” Covered Call until Friday, but I could very well be out of my long Call by then.
Today’s trade is a Covered Call on a very good stock that received an upgrade today. This is the safest trade you can make with options. It gets a Risk Factor 1.
Apple’s earning come out after the bell. If they’re good it can be a boost for the market tomorrow.
It’s only Tuesday, and anything can happen, but if this trade I made today works out well, this will be another great week. Like I said, it’s only Tuesday!
Steve
The Options Coach