{"id":13922,"date":"2024-01-25T13:00:37","date_gmt":"2024-01-25T18:00:37","guid":{"rendered":"http:\/\/www.mainstbeatswallst.com\/?page_id=13922"},"modified":"2024-01-25T13:26:12","modified_gmt":"2024-01-25T18:26:12","slug":"bought-2-options","status":"publish","type":"page","link":"https:\/\/www.mainstbeatswallst.com\/?page_id=13922","title":{"rendered":"Bought 2 Options"},"content":{"rendered":"

Hi Main Street beats Walls Street<\/strong>, It’s been a while!<\/p>\n

I hope all are doing well and enjoying the new year. I’m doing well but I am locked in my room right now with COVID lol. Don’t worry about me, I tested positive on Saturday and was blessed with a mild case. I’m in a separate room to protect my wife.<\/p>\n

This little (forced) vacation gave me a chance to develop my stock market strategy for 2024. As you know, from my lack of posting, I haven’t been trading much during Biden’s presidency. I have had a bad taste in my mouth since he entered. Probably because I gave back much of my gains in 2020 from the previous four years; as most of you know, they were very good years for the market. Now, with the new election year getting into full throttle I have a good feeling about the market. I must say, 2023 was a very good year. I didn’t do much trading but my other investments did very well.<\/p>\n

I’m very happy that I diversified. While I was in business and doing well in the market I was very happy I took money from my earned income and trading profits and invested in other areas. One of the areas also involved the stock market. For years I’ve invested in a mutual fund, as a non-retirement fund, and a Roth IRA as a retirement fund. Both were with the same company which is American Century Investments. With American Century I put money into two funds, one is called Ultra and the other is Heritage. With both of these funds my current allocation is 100% Stock Fund, however, on a simple phone call I can change this allocation. For example, if my outlook on the stock market is not as positive as right now I can change my allocation to something like, 65% Stock Fund, 30% Bond Fund and 5% Money Market Fund. If you are not a student of the stock market, companies like American Century are a great way to invest with a lot of flexibility and liquidity. Being an options trader, I guess you can say I have a little bit of a gambling chromosome. This is why my allocation is 100% into the stock fund. And this is why I had a great 2023. For the year my Ultra fund did 43.31% and my Heritage fund did 20.07%, which put me back in the game.<\/p>\n

Being locked up in my room for the last week I’m working on a strategy to get my trading account back in the game. For the last year I’ve been working on a High Dividend Stock Portfolio and this week I’m working on my trading. My trading, of course, will involve trading options. My #1 strategy will always be selling options. This includes selling covered options and selling Naked options. When I feel the market is on the move I will go to my strategy of buying options. Always remember buying options can be very dangerous. You can read about buying options on my Buying Call Options<\/a> <\/span>page.<\/p>\n

This leads me to two trades I made yesterday. Both were buying options. I bought one option of United Airlines (UAL) and one option of Micron (MU). I haven’t been trading much so I’m gonna start very slowly, especially when it comes to buying options. Let’s go over the trades.<\/p>\n

United Airlines<\/strong><\/span><\/p>\n

I decided to buy a UAL option because they came out with good earnings on Monday. I watched the market’s reaction for a day and I feel like the stock can move up a bit. I pulled the trigger on Wednesday morning. Again, I’m starting very slow with Grasshopper Trades. With the stock at $40.75 I bought 1 contract of the UAL 6\/21\/24 $41.00 Call for a premium of $4.13. The one contract cost me $413.<\/p>\n

1\/24\/24 – Buy to Open 1 UAL 6\/21\/24 $41.00 C @ $4.13\u00a0<\/strong><\/p>\n

I set a goal for my gain at 20%. This is a good goal but on a $413 investment it’s only 82 bucks. Remember, I’m starting slow with Grasshopper trades, Slow and Steady, Steady and Slow! My goal for the premium is to get to $5. If I get out with the premium at $5 my profit would be 87\u00a2 ($87 on the 1 contract, 100 shares). If I get out with the $5 premium the gain will be 21%.<\/p>\n

Notice the Expiration Date of this option, it’s 6\/21\/24. If my goal is to make $82 why do I want to be in an investment for 5 months? I don’t want to be in this position for 5 months. I want to be in for more like a few days, maybe a week. Going out to June with my Expiration Date gives me protection against Time Decay<\/a><\/span>. With a short term option your premium will decay away much faster than an option with a longer term option. Example: a 1 month option’s premium will decay much faster than a 6 month option, so I like to buy the option with the time protection against Time Decay. It’s been a while, welcome back lol.<\/p>\n

This morning the market opened in the green and UAL opened at $42.09, up $1.25. I watched it closely, excited because it’s the first option I bought in a while; I wanted to stick to my rules. The stock continued up and the premium went up to $5.25. I placed a Stop Loss order to sell the option at $5.10. At this point I knew I had my 20% locked in and possibly more. The premium continued up to $5.55 and I changed my Stop Loss up to $5.25. Now I have $5.25 locked in. As I was writing this article the stock fluctuated down to where the premium was $5.25 and my Stop Loss order was filled. This position is closed in one day.<\/p>\n

1\/24\/24 – Buy to Open 1 UAL 6\/21\/24 $41.00 C @ $4.13\u00a0<\/strong><\/p>\n

1\/25\/24 – Sell to Close 1 UAL 6\/21\/24 $41.00 C @ $5.25<\/strong><\/p>\n

Profit +$112<\/strong><\/span><\/h4>\n

My goal was to make 20% ($82) and I ended up with a gain of 27% ($112). I know this sounds like a small amount but it’s a great example of a Grasshopper Trade. I’m gonna start slow but we all know if this was 3 or 4 years ago I would have bought a 10 contract Call. Now the one day trade would have been a gain of $1120 on an investment of $4130. This is the power of options.<\/p>\n

Remember, if you’re gonna buy options you better know what you’re doing! And you better buy options with Time Decay protection; buy with an Expiration Date further out. Yes, one week or one month options are cheaper but you need protection when buying options. Also remember, 80% of options bought expire worthless. If you want to buy options stay in contact with me via email and I will coach you as much as I can.<\/p>\n

Let’s take a look at my Micron Long Option.<\/p>\n

Micron<\/strong><\/span><\/p>\n

Micron (MU) is a hot tech stock and I’ve been in it with a long stock position for a few weeks now. I decided to sell the stock and buy an option as I work on my options buying strategy. Again I only bought 1 contract. With the stock at $87.80 I bought 1 contract of the MU 6\/21\/24 $87.50 Call for a premium of $8.55 ($855).<\/p>\n

1\/24\/24 – Buy to Open 1 MU 6\/21\/24 $87.50 C @ $8.55<\/strong><\/p>\n

My goal for this position was also 20%. I want the premium to go to $10.30. A $10.30 premium will give me a gain of $1.75 which would be a gain of 20%. UAL being a $41 stock the premium was much lower. Here with MU the stock is at $87 the premium is much higher.<\/p>\n

As I write, MU is also up. On the day the stock is up $1.75 and is at $89.83. The premium is at $9.83. Once the premium gets above my goal of $10.30 I will either sell or put a Stop Loss order in place. This very well could happen today. I am not worried because my Expiration Date for this position is also in June. This gives me plenty of time for this position to get to my goal without expiring. I will watch this position closely and report as soon as I exit. I’m also watching UAL for another possible entrance point. Their earnings were very good just a few days ago.<\/p>\n

I will be writing about my High Dividend Stocks portfolio very soon.<\/p>\n

If you have any questions on buying options send me an email. Make sure you read my Buying Call Options page.<\/p>\n

It’s great to be back on Main Street beats Wall Street<\/strong> with you. I’m really hoping for a good year and if the election goes the way Wall Street wants we could get a nice 5 year run.<\/p>\n

 <\/p>\n

Successful Trading,<\/p>\n

Steve<\/p>\n

The Options Coach\u00a0<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Hi Main Street beats Walls Street, It’s been a while! I hope all are doing well and enjoying the new year. I’m doing well but I am locked in my room right now with COVID lol. Don’t worry about me, I tested positive on Saturday and was blessed with a mild case. I’m in a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-13922","page","type-page","status-publish","hentry"],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/P75MP0-3Cy","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/13922","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13922"}],"version-history":[{"count":3,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/13922\/revisions"}],"predecessor-version":[{"id":13926,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/pages\/13922\/revisions\/13926"}],"wp:attachment":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}