I feel Advanced Micro Devices (AMD) will be pulling back so I just sold 10 Naked Calls.
AMD has been a very hot stock and some may think I crazy for selling a Naked Call. But after looking long at the Candlestick Chart I see the stock staying below $36.50 this week. In addition to the Candlestick Chart the oscillators RSI indicates an overbought situation.
With the stock at $35.00 I was filled on my order. I sold 10 AMD 11/15/19 $36.50 Calls and received a premium of 50¢ for $500.
Sell to Open 10 AMD 11/15/19 $36.50 C @ 50¢ (+$500)
With the stock at $35 this is a Rate of Return of 1.4%. With this Call expiring this Friday this trade fits into my “1 Week/1%” strategy. Remember it’s not the amount of money you make, it’s the amount you make on your investment, Rate of Return.
As you might know Naked Calls are my favorite strategy. This is making money with NO investment. The Rate of Return I mentioned above is if I bought the stock with a Covered Call.
A Naked Call does present a problem if the stock goes up so I placed an order to buy the stock at $36.45. If the stock goes up to $36.45 the stock will automatically be bought into my account to cover the Naked Call. A Naked Call gets a Risk Factor 5 but with my Buy-Stop Order in place this trade gets a Risk Factor 3. There’s always a chance of the stock going up over night and my order will not get filled.
I will be watching this position closely all week.
I would like to welcome our new readers. If you have any questions send me an email.
Successful trading,
Steve
The Options Coach