Grasshopper Trades with MOMO and NKLA
I bought 400 shares of MOMO on 3/25 at $15.25 per share. The stock dropped back a little so I was selling Call with Expiration Dates out a few weeks to get a premium I like. I just had a Call expire this past Friday for a return of 2.3% for a 3 week contract.
With the shares available for another Call to be sold I was just filled on another 4 contract Call for another 2.3% premium. I sold 4 MOMO 6/18/21 $16 Calls for another 35¢ premium for $140.
Sell to Open 4 MOMO 6/18/21 $16.00 C @ 35¢ (+$140)
A 2.3% return on a 1 month trade is not the greatest but when your stock drops you must find a way to bring money in and not just stay idle. I’ll be writing about the problem of a stock dropping with a Covered Call. Hopefully I’ll get that post out this week.
I also made a Grasshopper trade with Nikola (NKLA). On 3/1 I bought 100 shares of NKLA at $18.80. NKLA is another stock that dropped. Today the stock is in the $14 area. With NKLA I took a different approach than MOMO. With MOMO I went out a month to get a premium I liked. With NKLA I took a chance and dropped the Strike Price. I’m in the stock at $18.80 and I sold the $15.50 Call. This puts me in a situation that if I get assigned I’ll lose money on the stock sale. I did this because I feel the stock will not get to $15.50 by this Friday. I will watch closely. If the stock gets to my Strike Price I’ll make a decision if I want to get assigned on these shares or buy another 100 shares to deliver on assignment.
Sell to Open 1 NKLA 5/21/21 $15.50 C @ 25¢ (+$25)
This $25 doesn’t seem like much but it is a 1.3% return for a 4 day trade. This fits into my “1 Week/1%” strategy. If you bought the stock today to make a trade like this your return would be in the area of 3.5%. According to the price you paid for the stock and the Strike Price you used.
On 3/1 when I bought the 100 shares of NKLA I also bought 1000 shares of the stock for a 10 contract trade. I also sold the same Call on these shares. The trade is posted on the Active Trades page.
Take a look at Peloton. This highly volatile stock is on the run. As I write it’s up $4. I have (2) 10 contract Calls sold to expire this Friday with the Strike Prices of $92 and $95. Right now the stock is at $96.25. It’s been as high as $97.85. I hope to get assigned on both of these Calls but with this stock’s volatility it could move in either direction $10 lol.
Successful trading,
Steve
The Options Coach