BREXIT caused a lot of volatility the last two weeks. Whether it was market experience or just pure luck, I don’t know, but I played the BREXIT volatility perfectly. Last week when the announcement was about to come out all experienced “TV traders” were saying “make sure you’re fully invested.” “When the vote comes out the market is going to fly.” Well that didn’t quite happen. The Brits voted out of the EU and the markets were in free fall. It just happens that I was in my normal short positions. I was in a few Naked Calls that I sold. I decided to stay in my short positions, contrary to what the “professionals” were saying. The market went down and my positions gained nicely. At the end of the week I locked in $4950. Take a look at my Trade History for last week to see all the trades.
This week my good fortune continued. With the BREXIT fallout hitting bottom, I played the market a little differently. I felt the market was going to rebound so I didn’t trade Naked Calls, all my positions were Covered Calls. I did not play it perfectly (according to the books). Perfectly would have been buying the stocks and NOT selling the Calls. I had three Covered Calls, U.S. Steel (X), Yelp (YELP) and AK Steel (AKS). All positions closed the week In-the-Money and all were Assigned. With all positions I had an Opportunity Lost. Please read about Opportunity Lost. This is a very important subject. I have a different philosophy than the books. When it comes to Opportunity Lost, I DON’T CARE! My philosophy is, if you worry about Opportunity Lost you’ll never sell Calls! And thats the business I’m in, premiums. Most people who only buy and sell stocks do not do well. This week it would have been better if I only bought stock but in the long run I do better with stocks and options. Take a look at my Trade History. Plus, I had a great week with Covered Calls. I didn’t loss money, I made a lot of money. In this game, if I don’t lose, I’m happy! Trying to get the most out of every trade is called greed. Greed will get you!
Let’s take a look at my trades exited this week. I had Covered Calls in the stocks mentioned above, plus I was able to exit an ongoing Roll Out position involving Yelp. You can go to my Trade History to see the Yelp Roll Out. There are too many trades to cover. The Roll Out was a Naked Call and the stock dropped enough for me to exit with a profit. It was a small profit, but it was a profit, not a loss!
Yelp Roll Out
Profit +$130
U.S. Steel
I already had a Covered Call on X expiring 7/15/16 and this week. I bought another 5000 shares at $17 and sold a three day Call for a premium of $.10 ($500). It’s not much but it was a three day Call. I went into this position only for the premium. Meaning I wasn’t looking to make money on the stock. I bought the stock at $17 and sold the $17 Call. Friday the stock closed at $18.27. The stock took off late in the day because of some unusual activity with one of the options. There were thousands of contracts of the Jan 2017 $24 Calls being bought. There was speculation there might be a takeover bid in the works. So far no news! With the big jump in the stock I had a huge Opportunity Lost. If I did’t sell that $17 Call I would have made a lot more money but I only bought stock to sell the Call. Anyway I made $500 and I’m happy!
Profit +$500
Yelp
On June 18th I sold 30 Naked contracts of YELP 7/1/16 $29 Calls for the premium of $.25 ($750). After the BREXIT fallout I felt the market was going to move. I covered my Call on June 24th by buying 3000 shares of the stock at $28.30. Yelp also went above my Strike Price and closed Friday at $30.41. This was also an Opportunity Lost! But with Yelp I did better that with U.S. Steel. I bought the stock at $28.30 and was assigned at $29 for a $.70 profit on 3000 shares of $2100. Plus the premium of $750. Total profit on the Covered Call was $2850. This was a nice trade!
Profit +$2850
AK Steel
On Tues, June 28th I sold 50 Naked contracts of AKS 7/1/16 $4.50 Call for a premium of $.11 ($550). When I sold the Call the stock was at $4.32. The stock started up so on Wed so I covered by buying the 5000 shares at $4.40. This stock also jumped up and closed Friday at $4.85, another Opportunity Lost! I was assigned at $4.50 for a $.10 profit on the stock ($500). Plus I keep the premium of $550 for a total profit of $1050 on the Covered Call.
Profit +$1050
It was a nice week! I think it’s a prefect example of my strategy. It started with ending a Roll Out with a profit, then three Covered Call (two starting as Naked Calls) not worrying about the Opportunity Lost while making a nice profit. Beautiful week!
Total Weekly Profit +4530
Enjoy the 4th of July weekend! 240 years since the signing of the Declaration of Independence.
Trivia: Did you know that 3 of our first 5 presidents died on the 4th of July? Without Google, Can you name them? Email me the answer.
The first 5 presidents were the only presidents to be founding Fathers! Number 6, John Quincy Adams was not a Founding Father!
Steve
The Options Coach