I really like Lexinfintech (LX). This is a FinTech company based in China. I think once we get through, or see progress, with the coronavirus I think we’ll see this stock move. I wrote a short report on the stock that you can read at Lexinfintech – Portfolio Report.
This morning I bought 10 Call on the stock. I have the stock in the 5 Star Trading Portfolio in Wealth Builder, and I would like to have the LEAPS in my Stock Alternative Portfolio but there are no LEAPS in their Option Chain. The furthest they go out with their options is 8/21/20, which is 192 days away. This is the option I bought this morning.
With the stock at $13.65 I bought 10 8/21/20 $15 Calls at $2.16.
Buy to Open 10 LX 8/21/20 $15.00 C @ $2.16 ($2160)
I will watch this position very closely since there is only 6 months until expiration. I will watch for them to add to their Option Chain as time goes by and options expire. Once they add another Expiration Date I’ll sell this option and buy the next one out. I wish they had LEAPS but they don’t, so I went out as far as I could.
I had an order in to sell a 3/20/20 $17.50 Call for a 40¢ premium. As I’m writing, just now, I was filled on that order.
Sell to Open 10 LX 3/20/20 $17.50 C @ 40¢ (+$400)
Take a look at the Strike Price and Expiration Date of my Long & Short Calls. I did these two trades as a Diagonal Bull Call Spread. The Long Call goes out further and has a lower Strike Price. This means, if at expiration of the Short Call (3/20/20) it’s In-the-Money I have the “right” to buy the stock at $15 to deliver at $17.50.
Premium Reinvestment Strategy
With the selling of my Short Call I received a premium of $400. With this $400 I did Premium Reinvestment. I just bought 28 shares of LX at $13.95 which cost me $390.60 of the $400 premium.
Buy 28 Shares LX @ $13.95
I think this is a great trade for a Grasshopper. It cost me $2160 to buy the option which I sold an option against. The option I bought gave me a $400 premium. This is 18.5% I brought in on my investment and these trades didn’t effect my margin at all, or very little.
If this stock goes up I’ll make money on my Long Call Option and the shares I own. Slow and steady, steady and slow, I think this is a great, safe way to build wealth.
With the coronavirus, and this being a Chinese company, this trade does have a little more risk. I’ll give this trade a Risk Factor 2.
If you have any questions…. you know what to do.
Successful trading,
Steve
The Options Coach