My Peloton Roll-Out Gives Me a Huge Week
To be an options trader, I feel, you need to be knowledgeable, and you need to be a strategic thinker. It’s not enough to know your subject matter. You also must be a problem solver. As a basketball coach I wanted to know the game, in addition to using my strategic mind to figure out how to beat the other team. Kind of like playing chess. Being an options trader is no different!
Before I write my week ending results I wanted to write about my Peloton trades, which was the reason for my huge week. I made a losing trade into a very big winner. I think I was able to do this by being knowledgeable, and using my thinking to decide what moves I would make to make a bad situation better. Believe me, I completely understand you need the market to move in your favor for most strategies to work. However, it’s not only being lucky! Being knowledgeable and doing your homework helps you make better decisions.
Let’s take a step by step look at the series of Peloton trades I made when my initial trade went bad. You can follow my trades below as I write about each step.
(1) – The first trade I made was I sold a Peloton 10 contract Naked Call. You can see below I made the trade on 8/26/20 and it had a Strike Price of $72. I received a premium of $1.30 for $1300. The next day, the 27th the stock started moving up and went above my Strike Price. I still had a week to go before expiration so I decided to watch a little longer. The stock never looked back and kept moving up.
(2) – On 9/1 I knew I would have to do a Roll-Out so I decided to buy 1000 shares to cover the Rolled-Out position. I bought the 1000 Shares at $81.90
(3) – Also on 9/1/20 I sold another Call to go with the shares I bought the same day. I still had 3 day before my $72 Call would expire so I decided to watch it a little longer to see if the stock came down a bit. If it did it would cost me less money to do the “Buy to Close.” The Call I sold was an $85 Strike Price. To get a decent premium I had to go out to 9/25/20. This Call gave me a premium of $8.50 for $8500. I now brought in the $1300 and the $8500 for a total of $9800. The problem was I still had to close the initial position with a “Buy to Close.” I was still unsure what that would cost.
(4) – The stock went up but came down a little on Expiration Day, 9/4. However, it still cost me $12 to do a “Buy to Close.” At this point I sold the Calls bringing in $1.30 for $1300 and $8.50 for $8500 for a total of $9800, but it cost me $12 for $12,000 to get out of the 1st position. I was down $2200 and it didn’t look good making this a winner!
(5) – On 9/4/20 I didn’t like the way this looked. I was in a situation where I was gonna lose $2200. I do not like losing money! On 9/4, with the stock in the $81 area I sold another Naked Call to bring in another premium to cut my $2200 losing situation. This was another 10 contract Call with the Strike Price all the way up at $95. With the volatility high I was able to get a premium of $6.80 for $6800. This put me in the plus and a lot of room before the stock got to my $95 Strike Price. At this point I am plus $4600 with premiums, I have a Covered Call, and a Naked Call $14 Out-of-the-Money with the Strike Price of $95.
(6) – As luck would have it the stock continued up. With the stock at $88 I bought another 1000 shares to Cover the $95 Call. At this point I am up $4600 on premiums and I have 2 Covered Calls. I am completely covered!
(7) & (8) – Yesterday, 9/25 the stock closed at $97.73. Crazy! I was assigned on both of my Covered Calls. On my $85 Call I bought the stock at $81.90 making a profit of $3100 on assignment, and on my $95 Call I bought the stock at $88 making $7000 on assignment. In addition to this my Calls expired leaving me with a $4600 profit in premiums. The total return on this series of trades was $3100, plus $7000, plus $4600 for $14,700.
You can follow all trades in order with the numbers in parenthesis.
Peloton Roll-Out
(1) 8/26/20 – Sell to Open 10 PTON 9/4/20 $72.00 C @ $1.30 (+$1300)
(4) – 9/4/20 – Buy to Close 10 PTON 9/4/20 $72.00 C @ $12.00 (-$12,000)
(3) – 9/1/20 – Sell to Open 10 PTON 9/25/20 $85.00 C @ $8.50 (+$8500)
(5) – 9/4/20 – Sell to Open 10 PTON 9/25/20 $95.00 C @ $6.80 (+6800)
Profit +$4600
Covering the Roll-Out positions
(2) – 9/1/20 – Buy 1000 Shares PTON @ $81.90
(7) – 9/25/20 – Assigned 1000 Shares PTON @ $85.00
Profit +$3100
(6) – 9/9/20 – Buy 1000 Shares PTON @ $88.00
(8) – 9/25/20 – Assigned 1000 Shares PTON @ $95.00
Profit +$7000
This might be a little confusing but try to follow it. Sometimes you have to do things like this to make a winning trade. If you have any questions send me an email.
Yesterday I was teaching all day and I didn’t get to report these trades. At the close I made a few trades. I had a few Covered Calls going that I was not gonna get assigned on so I started next week by selling another Call on PayPal and Micron.
PayPal
9/25/20 – Sell to Open 10 PYPL $190.00 C @ $3.00 (+$3000)
Micron
9/25/20 – Sell to Open 10 MU 10/2/20 $52.00 C @ $1.00 (+$1000)
Watch for my week ending report. It was a great week.
Successful trading,
Steve
The Options Coach