Grasshopper Trade With LULU

I really like the stock Lululemon (LULU). A few weeks ago they came out with great earnings so I’ve been watching it very closely. I am worried about the market but hopefully we can finish up the year with a strong ending.

This morning I decided to buy 100 shares and sell a 1 contract Call against them. I bought the shares at $356 and a few minutes ago I sold the $362.50 Call Option receiving a premium of $6 for $600. This option will expire this coming Friday, November 18th.

Buy 100 Shares LULU @ $356.00

Sell to Open 1 LULU 11/18/22 $362.50 C @ $6.00 (+$600)

 

The $6 premium is a Return on Investment (ROI) of 1.68% for the 5 day option. If I get assigned at my Strike Price of $362.50 I’ll make an additional $650 on the stock sale. If assigned my total gain will be $1250 which is a return of 3.5%.

I give this trade a Risk Factor 2. Covered Calls are a low risk trade but this market adds more risk than normal.

I consider this an expensive Grasshopper trade; $356 is a lot of money to pay for a share of stock. I was going to make another trade with Nvidia with the stock a bit cheaper, about half the price, but the company is reporting earnings this week, on Wednesday, and this kind of news adds a lot of risk to a trade.

Lets watch how this trade plays out and let me know if you have any questions.

 

Successful trading,

Steve

The Options Coach