My stock positions have been fighting back from Monday’s blood bath. A few are getting close to the point where I can get new Calls sold. I was just filled on a 10 contract AMAT Call.
Last week was a great week where I locked in $4800. 3 of the trades were Covered Calls with Micron (MU), Twitter (TWTR) and Applied Materials (AMAT). All 3 of there Covered Calls expired where I kept the premiums but I was not assigned on any of these shares.
The market has been very volatile with interest rates, trade problems and China manipulating it’s currency. It seem like there’s new news coming at us by the minute. And we all know it’s news that moves the markets. With the volatility, all 3 of the stock positions closed below there Strike Prices. Plus this week started off really bad and the stocks fell below my purchase prices my a few dollars. The stocks have been fighting back but after the record down day on Monday they had a long way to climb. Today, 2 of the 3 are in an area where I can get a Call sold. Earlier I placed 2 orders, 1 with AMAT and the other with TWTR. MU still has a little more to go and the premiums are just not attractive enough. With both AMAT and TWTR I placed the orders with an Expiration Date of 8/16 which is next Friday. With AMAT I wanted a premium of 45¢, and TWTR, which is a little more volatile, I went for 80¢. The AMAT was just filled but not TWTR. I hope I get filled on TWTR today or tomorrow. If I don’t get filled by tomorrow afternoon I might have to lower my premium to 75¢ or 70¢. With MU, which is up 85¢ as I write, I hope to also get a Call sold at some point to expire next Friday.
I bought my AMAT 1000 shares at $50.40. Last week’s Call was a $51 Call. Today I lowered the Strike Price to $50.50 and was filled on a 45¢ premium. You know I like to get a 1% premium but with a big drop in the stock this week I decided to bring in a little less. This total premium is $450 and it will expire next Friday. This is not bad considering the blow the stock took, and I already received a premium late week of 60¢ for $600.
Sell to Open 10 AMAT 8/16/19 $50.50 C @ 45¢ (+$450)
Take a look at Advanced Micro Devices (AMD). It is flying today! Up $5 for 17%. This stock took a big flop last week after earnings but today announced a huge contract with some big companies including Google and Twitter. I own 1000 shares.
As I said earlier, this is a very volatile market. Not a great environment for a Grasshopper! You need a strong stomach and most Grasshoppers are not ready for their stocks to take huge swings. This might be a good time to sit back and watch. Do your studying and do some paper trading. If you do papering trading and watch the positions you can really learn how the volatility affects the premiums.
I’ve been getting emails asking what I was gonna do with my stocks down from where I bought in. I’m receiving comments like “now what are you going to do“? One of the problems with Covered Calls, and just owning stocks, is sometimes the stocks go down. This is part of the game we’re in. Get used to it! I feel some readers are upset I’m posting gains from premiums and not talking about what my account is doing from the drop in the stock. It is true that I post the gain, or loss, when I get out of a position and not the paper loss of the stock. I will post the stock gain, or loss, when I exit that position. Until that it’s not a loss, or a gain. This is mentioned on my “Home Page.” “I will post when I get in a position and I’ll post when I exit that position.” You can look at all my position still active on my “Active Trades/Current Position” page. Having said that, it’s very important when doing Covered Calls you do them with stocks you believe in. You must have confidence that if a stock takes a dip it will come back. If it doesn’t, you picked the wrong stock! It happens! If you want to free up that money to put it to work somewhere else, you just have to take a loss and move on.
Steve
The Options Coach