This morning a report came out on Under Armour (UA). Morgan Stanley downgraded the company to “underweight.” With that I sold 10 contracts of the 1/15/16 $70 Naked Calls. At the time the stock was down over 8%. Right now the stock is down 9.15% and the premium went way down. I just bought my way out of the Call. Here’s the order”
Buy to Close 10 UA 1/15/16 $70 C @ $.70
I sold my Call for $1.10 for the premium of $1100 and I bought back for $.70, for a premium of $700. I sold for $1100 and bought for $700. the total profit is $400. This took 2 hours. I could have held this Call until expiration and try to keep the entire premium of $1100 but Naked Calls are dangerous. If I can get out making a nice profit, I do. You never know what the market going to do. My strategy is take the money and run. Next deal! You must read the page “Long & Short Positions” if you don’t understand how this works. This deal is over!
Profit +$400
“Money in the Mattress”
While I was writing the above report on the UA deal, NFLX dropped a little. I stopped writing to look what the premium of the $119 Call I sold earlier. I sold 5 contracts on stock I previously owned. I received a premium of $2 on the 500 shares for $500. I just did this 3 hours ago. When I looked the premium was $.70 so I put an order in to buy back the call. I figured, If I can grab a profit maybe the stock will go back up and I’ll sell the Call again; if not today, maybe tomorrow. Here’s the order:
Buy To Close 5 NFLX 1/15/16 $119 C @ $.70
My Call was executed and I’m out of that Call for the $.70. I sold for $2 and I’m out for $.70. This is a profit of $1.30. On the 500 shares the total profit is $650 in 3 hours. This deal is over!
Profit +$650
“Money in the Mattress”
You must understand, I not day trader! It’s just working out that way because of the volatility of the stock I’m in today.
Steve
The Options Coach