The electric car makers have been on a tear lately. Today a deal between GM and Nikola (NKLA) fell apart, or at least was reduced from the original deal. The stock is down $7 since the announcement. With the stock down and the premiums high, I just did a “Buy-Write.” I bought 1000 shares of the stock at $20.60 and sold a 10 contract 12/4/20 $21 Call for a premium of $2.05 for $2050.
Buy 1000 Shares NKLA @ $20.60
Sell to Open 10 NKLA 12/4/20 $21.00 C @ $2.05 (+$2050)
This is a huge 9.9% premium. These electric car makers have been very volatile but I think a 9.9% premium was worth the risk. It’s only a $20 stock. Taking this into account I give the trade a Risk Factor 3. Without the GM deal the stock can drop a few dollars.
Successful trading,
Steve
The Options Coach