Sold 10 PTON Naked Calls

Clearly, I love trading Peloton (PTON). I made a lot of money with the stock, and selling Calls, in 2020. There are a few reasons why, which I’ll talk about .

The first reason is PTON is a COVID stock, and we have been in the COVID pandemic for most of 2020. PTON sells exercise bikes that come with a subscription. With many gyms closed, for many months, there are a lot of people exercising at home. Not only is Peloton getting the bike sales, but they’re getting subscription fees every month. This has the stock on a crazy run for the entire year of 2020.

Another reason why I’m doing so well with PTON is it’s Implied Volatility (IV). I will be talking more about IV but right now I will tell you I like the stock’s IV. I suggest you do some research on IV, and together with what I write you can start to understand how important it is. PTON has a high IV. A high IV makes it very inviting for option sellers because of the high premiums. High IV makes it not inviting for option buyers because of high premiums.

I’ve made a lot of trades with PTON and they all involve buying the stock and selling Covered Calls, or just selling Naked Calls.

The Implied Volatility (IV) gives you a number that the market thinks the stock can move, up or down, in a certain time period. Because of the stock being a COVID stock, it makes it more predictable which direction the stock will move.

Before today, I have a 10 contract Covered Call with PTON which will expire this Friday. I received a $3000 premium with a Call I sold $1 Out-of-the-Money. With this one position I will make a $3000 premium and probably the $1000 on the stock assignment. Today with the stock at $99 I was filled on a 10 contract Naked Call that will expire this Friday. That’s only a few days away. I sold the $108 Strike Price and received a 70¢ premium for $700. I was able to get this premium with a Call $9 Out-of-the-Money because of the IV.

Sell to Open 10 PTON 10/2/20 $108.00 C @ 70¢ (+$700)

The stock is still moving higher and I could have gotten a little more on the premium but I’m happy with the $700.

This trade is a Naked Call on a hot stock so it gets a Risk Factor 4. It still has a long way before it gets to my Strike Price, but I’ll watch closely. I do not think it will get that high. If it does make a big move up I’ll buy another 1000 shares to cover this Call.

I only touched on Implied Volatility. If you want to be a good options trader start studying IV. I will be writing more very soon.

Successful trading,

Steve

The Options Coach