I was just filled on a Naked Calls on Square (SQ) and sold 5 Micron (MU) Puts.
Last Tuesday SQ hit it’s lowest price since January 3rd. On Tuesday it was down to $54.41, which turned out to be support and a reversal. Since Tuesday it’s been moving up. Today it’s high was $62.24. Since last Tuesday the stocks up $7.87; that’s in 5 sessions. Today as I write the stock is up $1.22.
I wanted to sell a Call because I liked the premiums. The premiums are a little higher because of the stock’s move. However, I didn’t want to own the stock. I decided to sell a Naked Call. The way the stock is moving I might not be Naked long but I’m thinking it might slow down a bit because of it’s big move. But, to protect myself, I place a buy order if the stock goes up to $62.75. I sold 10 SQ 10/4/19 $63 Calls for a premium of 70¢, for $700. This option will expire this Friday.
Sell to Open 10 SQ 10/4/19 $62.00 C @ 70¢ (+$700)
Normally a Naked Call would get a risk factor 5 but since I placed a buy order to cover it I’ll give this trade a Risk Factor 3. It gets a 3 and not a 1 because there’s always a chance the stock can go up over night and my buy order will not get filled.
I also had an order placed to sell 5 Puts on Micron (MU). As I was writing the above notice of the SQ trade I was filled on my MU trade. MU moved down last week and today it looks like it might have hit support. Today the stock’s up 10¢. I feel the stock might go up this week so I sold 5 Puts. With the stock at $43.35 I sold 5 $42.50 Puts. I received a premium of 45¢. I like the stock so if I have 500 shares put to me I’m very confident the stock will not stay that low too long. Since I like the stock this is not a risky trade to me. I’ll give it a Risk Factor 2.
Sell to Open 5 MU 10/4/19 $42.50 P @ 45¢ (+$225)
Keep an eye on your email. I’m gonna try to make a few more trades this week.
If you have any questions on how Puts work send me an email.
Steve
The Options Coach