Filled on Grasshopper Trades with NIO & MOMO
The market is moving a little today but nowhere near where I need it to go. My account is up today and I just keep nipping away at the loss column with the adding of premiums.
Since my last post I was filled on 3 trade orders. 2 are Grasshopper Trades with NIO and MOMO, and the other is a 10 contract Call with NIO.
On 1/11/21 I bought 1000 shares of NIO at $65.40. the stock is down with all the EV stock because of the chip shortage. It looks like the shortage is going to last this entire year. I’ll just have to keep bringing in premiums. To get a decent premium I have to go out a bit on the Expiration Date, and also lower my Strike Price, which adds some risk because if assigned I’ll lose money on the stock sale. With stocks in this situation I’m picking Strike Prices I feel the stock will not reach in the contract time period.
The 1st trade in the 10 contracts with NIO. I sold 10 NIO 5/7/21 $46 Calls for a premium of 45¢ for $450.
Sell to Open 10 NIO 5/7/21 $46.00 C @ 45¢ (+$450)
This trade gets a Risk Factor 2 because of the lower Strike Price.
Next I have the Grasshopper Trade with NIO. I bought these shares at $63.75. I sold 1 contract of the NIO 5/7/21 $46 Call for the same 45¢ as the trade above.
Sell to Open 1 NIO 5/7/21 $46.00 C @ 45¢ (+$45)
This trade also gets a Risk Factor 2 for the same reason.
The last trade is with MOMO. I bought 400 shares on 3/25/21 at $15.25 to do a Grasshopper Trade. I did that trade but was not assigned. I just sold another Call. I sold 4 MOMO 5/14/21 $15.38 Calls for a premium of 35¢ for $140.
Sell to Open 4 MOMO 5/14/21 $15.38 C @ 35¢ (+$140)
Did you ever see a Strike Price like this, $15.38. I didn’t! When I looked at the Option Chain all the Strike Prices ended with 38¢ of 88¢. I decided to call Charles Schwab to see what the story was. It turns out that MOMO was approved by their board to issue a special dividend. This doesn’t happen often but when it does, they informed me that the company makes adjustments to the Strike Prices. I really didn’t understand why but I went with the explanation and sold a Call with the Strike Price of $15.38.
I bought the stock at $15.25 and sold the $15.38 Calls so if assigned I’ll make a few cents on the stock sale. This trade gets a Risk Factor 1.
Successful trading,
Steve
The Options Coach