I entered a trade at about 11:30am. It was just filled at the closing bell. I sold 10 contracts of Twitter (TWTR) $42 Calls.
Back on 7/30/19 I bought 1000 shares of TWTR at $42.90. I sold Calls without be assigned, with the Expiration Dates of 8/2, 8/9 and 8/23. These 3 trades brought in a total of $1730 in premiums. You can see at Trade History 2019. All of these Call had the Strike Price of $43. Today with the stock at $42.43 I was filled on a trade with the Strike Price of $42. You might ask, if the stock was bought at $42.90 why would I sell a Call with the Strike Price of $42? If I get assigned I’ll lose 90¢ on the stock sale. Which is $900!
Well, here’s my thinking. I’m up $1730 since I bought the stock with the premiums I brought in. With the market volatility I really want to get out of some of my stock holdings. Even with the market and the stock up today I couldn’t get a premium worth trading with the Strike Price of $43. The premium would have been less than 15¢. With my $42 Strike Price I received a premium of 40¢. I figured let me grab another $400 in premium, in addition to my $1730, and see what happens. If I get assigned I keep the $400 and sell my stock at $42. If the stock doesn’t get to $42 by this Friday, my Expiration Date, I’ll keep the stock and my collective premiums will be up to $2130. Either way I’ll be OK.
I hate taking a loss on the stock sale but I’ll be up $2130 with premiums. If I get assigned I’ll be up the $2130 with premiums and down $900 on the stock sale for a total gain of $1230. Like I said, I’ll be OK with that.
Sell to Open 10 TWTR 8/30/19 $42.00 C @ 40¢ (+$400)
This is a very tough environment to be trading. The volatility is off the charts. If you watch any of the financial shows you will hear many Wall St traders, who manage millions of dollars, speaking of their concern. The things driving them nuts is the tweets, fake phone call reports, lies, talk of negotiating, denial of negotiating, etc. No one has ever witness anything like this before.
Let’s see what tomorrow brings.
This trade is a Covered Call on previously owned stock so it get a Risk Factor 1.
Steve
The Options Coach