{"id":2784,"date":"2017-02-28T11:51:00","date_gmt":"2017-02-28T16:51:00","guid":{"rendered":"http:\/\/www.mainstbeatswallst.com\/?p=2784"},"modified":"2017-03-05T11:00:16","modified_gmt":"2017-03-05T16:00:16","slug":"sold-more-u-s-steel-calls-for-insurance","status":"publish","type":"post","link":"https:\/\/www.mainstbeatswallst.com\/?p=2784","title":{"rendered":"Sold More U.S. Steel Calls for Insurance"},"content":{"rendered":"

\"\"<\/a><\/p>\n

Before this post I only had a 50 contract Covered Call involving U.S. Steel (X), expiring this Friday, March 3rd. I just sold another 50 contract Call. This can be a good lesson on one of my strategies for Grasshoppers<\/a><\/span>. I sold this Call, which is Naked, for 2 reasons. The first reason is sticking with my “2017Challenge<\/a><\/span>.” In my challenge I have a goal to make $3000 per week for the entire year. I believe, I’m well positioned to accomplish this goal for the present week, so I’m starting on next week. I just sold a 3\/10\/17 $42.50 Call for the premium of 70\u00a2. On the 50 contracts that’s $3500. If things work out well with this position, I will more than satisfy my goal for next week. This premium of 70\u00a2, on a $39.60 stock (at the time of my sale) gives me a 1.76% Rate of Return<\/a><\/span> on an investment of 11 days. That’s if I hold this position until expiration.<\/p>\n

Let’s take a look at the second reason I sold this Call. This Naked Call I sold for insurance. If you read my page on my strategy “Triple Play Hedge<\/a>,<\/span>” you will see how I get insurance and get paid for it. I really don’t like to buy hedging with an offsetting position. If I were to buy insurance on my Covered Call, I would buy a Put,<\/strong> which would increase in value if my U.S. Steel stock went down. I feel the cost of the Put<\/strong> is too expensive! You must understand, this is only my philosophy. Many great, successful traders buy hedging. I do not recommend my way of getting insurance or getting it by buying an offsetting position. I’m only teaching what I do. You must do what you’re comfortable with.<\/p>\n

When I sell a second Call, which is a Naked Call, I get insurance and I get paid for that insurance. I get the premium. If my stock goes down, my Short<\/a><\/span> Call position premiums will decrease in value. This means it would be less expensive to buy back my Call. I am gaining value. If the stock goes down, my option value goes up in value for me. In this case the premium is $3500. The only problem with my strategy of getting paid to get insurance, I’m only covered up to the amount of the premium I bring in. If U.S. Steel tanks down big, and my 70\u00a2 premium goes down to 0, I have no more insurance but the $3500 is in my account. If you buy a Put<\/strong>, as the stock goes down the Put<\/strong> continues to increase in value. These 2 ways to get hedging are very important to understand. It’s also very important to understand how Short & Long<\/a><\/span> positions work. If you don’t understand send me an email.<\/p>\n

The Call I sold yesterday is a $40.50 Call expiring this Friday the 3rd. If the stock doesn’t get to this Strike Price the Call will expire and I’ll keep the shares. These shares will cover the $42.50 Call I sold today. Today’s Naked Call will become a Covered Call.\u00a0At the moment this Call is Naked, however, it’s 2 and a half dollars Out-of-the-Money<\/a><\/span>. With this in mind, I feel it’s a little less risky. I give this trade a Risk Factor 3<\/strong>. Here’s the order:<\/p>\n

Sell to Open 50 X 3\/10\/17 $42.50 C @ 70\u00a2 (+$3500)<\/h4>\n

 <\/p>\n

Let’s watch closely to see how these positions work out for me. Make sure you read my strategy “Triple Play Hedge<\/a><\/span>.” Please understand how I get paid for my insurance. In this case above I have a Covered Call and a Naked Call. In my “Triple Play Hedge” I would have a Covered Call and 2 Naked Calls. This would give me 3 Calls sold 1 stock.<\/p>\n

 <\/p>\n

Steve<\/p>\n

The Options Coach<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Before this post I only had a 50 contract Covered Call involving U.S. Steel (X), expiring this Friday, March 3rd. I just sold another 50 contract Call. This can be a good lesson on one of my strategies for Grasshoppers. I sold this Call, which is Naked, for 2 reasons. The first reason is sticking […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-2784","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p75MP0-IU","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts\/2784","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"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=2784"}],"version-history":[{"count":1,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts\/2784\/revisions"}],"predecessor-version":[{"id":2786,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts\/2784\/revisions\/2786"}],"wp:attachment":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}