Back in the 1st week of the year I sold 20 contracts of the $20 Naked Call on Gopro (GPRO) when the stock was in the $18 area. Right after I sold the Naked Call the stock ran up approaching my $20 Strike Price. Thinking the stock was going to continue to run up I covered my Call buying the stock at $19.89. As soon as I bought the 2000 shares, the stock started down. It’s crazy how often that happens! The Call eventually expired and I kept the premium but the stock continued down as well and I’m still holding the stock today. The only good thing is I’ve been selling Calls ever since bringing in good premiums. Well the last Call I sold was on 4/4/16. I sold 20 contracts of the $16 Calls expiring 7/15/16 bringing in a premium of $.70 ($1400). Today the stock took another drop as it’s been doing since they reported earnings about a week and a half ago. The stock is down to $8.85 and the premium I sold for $.70 is down to $.05. With 65 days before my option expires I decided to buy my way out for the nickel. Why hold it for another 65 days to make the $.05? A lot can happen in the near future. I’m hoping some bigger company buys them up and sends the stock back up. If not I’ll hope the stock goes up on it’s own and I can sell another Call. With this one I brought in at $1400 and ended the deal with a fee of $100 for a profit of $1300. Here’s the buy order:
Buy to Close 20 GPRO 7/15/16 $16 C @ $.05 (-$100)
Profit +$1300
Every book will tell you Covered Calls are the safest trades to make with options. What happened with GPRO in this trade is the problem with Covered Calls. I much rather Naked Calls. Naked Calls I never have to cover. I’m in this game for the premiums. You will see, if I ever lose money, it’s because I owned the stock. I don’t like owning stock!
Steve
The Options Coach