Good morning Main Street beats Wall Street readers. I hope everyone had a great Father’s Day! This morning Deutsche Bank upgraded YELP from a hold to a buy. The stock is up almost 5%. While Deutsche Bank and others have a buy rating there are still many brokerages that have a rating of hold or sell. With the stock at $28.30 I sold a $28.50 Call to expire this Friday. I brought in a premium of $.50 ($500). This is a Naked Call but if I were to buy the stock to do a Covered Call I would have invested $28,300 on the 1000 shares. If I invested the $28,300 that would be a 1.7% Rate of Return for a 1 week investment. Since I didn’t buy the stock, because I did a Naked Call I would keep the $500 without an investment. Let’s hope it stays below the Strike Price. I give this trade a Risk Factor of 5 because it’s a Naked Call and the the price of the stock is close to the Strike Price. I feel good about this trade but it’s the most dangerous type of trade. Here’s the order:
Sell to Open – 10 YELP 6/24/16 $28.50 C @ $.50 (+$500)
If you have any questions on this trade and why it’s a high risk trade, please email me.
Steve
The Options Coach