Grasshopper Report 3/19/21
This is the Grasshopper trades weekly results for week ending 2/26/21.
There are 2 lessons I want to go over today. One has to do with the trades you decide on, and the other, managing your account.
Today’s Lesson #1
As Grasshoppers, your main strategy, maybe your only strategy, is Covered Calls. Picking your underlying stock is of utmost importance. You must do your homework! Do your technical analysis. You must pick good stocks. Covered Calls are the least risky strategy when trading options, but it doesn’t always work well. The biggest risk is your stock taking a big dip and you don’t get assigned and you have trouble selling another Call the following week. Example: You buy a stock at $20, you sell a $22 Call and receive a 50¢ premium, the stock drops to $10 and you don’t get assigned. The following week you cannot get a good premium selling the $20 Call because it’s too far Out-of-the-Money. You do not want to sell a $15 Call because if you get assigned you will lose $5 on the stock sale.
You might have to be idle a few weeks until the stock recoveries. You might have to sell a Call out a few months with the Expiration Date. Either way your money is tied up for a while.
You must pick good stocks that hopefully will not take big dips.
The bottom line is, it happens! Picking direction in the stock market is the toughest thing to do.
I try to make it very clear that I make trades as examples of Grasshopper Trades, NOT to have you mimic my trades. I want you to learn how to find your own trades. Learn how to do research. Don’t be lazy and don’t take tips. Do your own homework!
When I make a Grasshopper Trade it’s a very small percentage of my account. If a Grasshopper Trade goes bad on me it’s not going to affect me much. However, it might be a major part of your account. I always try to make good picks, but right now I’m in positions with INSG and SLV as Grasshopper Trades and they are not going well. They are well below my buy in price and I cannot get Calls sold. Also NIO is not going well but I have a Call sold. I still like these stocks but the NASDAQ took a beating for a while and hurt all the tech stocks.
Today’s Lesson #2
It’s very important to manage your account. I always try to have money on the sidelines ready to go to work. I want to bring money in every week; if some of my positions go bad I still have money to work with. If your account is $20,000, only invest $10,000 a week. If the $10,000 worth of investments goes bad you still have money to work with the next week while you wait for your bad investments to recover. Don’t be greedy and invest everything. You’re a Grasshopper! You are in the learning stage, not the get rich stage. Be concerned with your Return on Investment (ROI) and learning how to manage your account. When you slowly build your account you will be a smart, disciplined trader.
I only had one Grasshopper Trade end this week. Back on 3/1 I bought 200 shares of MOMO at $16.75 and have been selling Calls since. This week I sold a 2 contract Call for a 45¢ premium for $90. This is a Return on Investment (ROI) of 2.6%.
3/15/21 – Sell to Open 2 MOMO 3/19/21 $17.00 C @ 45¢ (+$90)
3/19/21 – Expired 2 MOMO 3/19/ $17.00 C
Profit +$90
The $90 doesn’t sound like much but I love this trade. I love it because I love the 2.6% for a 1 week trade.
Total Weekly Gain +$90
Any questions send me an email.
Successful trading,
Steve
The Options Coach