Yesterday I did a Buy-Write with U.S. Steel (X). I bought 5000 shares of the stock at $17.60 and I sold an $18 Call expiring this Friday. Before I did this Buy-Write I already had a 50 contract Covered Call on X. When I did the Buy-Write I did not feel comfortable purchasing another 5000 shares for a total of 10,000 shares. Today X was moving up and down all day. The low was $17.42 and the high was $18.06. When it went down my heart was not beating well and when it went up I felt better. With the stock near it’s high a few minutes ago, I decided to sell 5000 shares and go naked on my 50 contracts of the $18 Calls. I sold the shares at $18.02. I grabbed a $2100 profit on the stock but I’m Naked on the $18 Calls. The question is, why did I do this?
With 2 days to expiration I’m really not happy with the way the market’s moving. The stock hit $18 a few times during the day and returned down. I do not feel the stock is going to have a big break out. I decided I would rather take the chance on the stock closing Friday In-the-Money and have to do a Roll Out than take the chance of the 5000 shares going down a point or two. I will watch this closely to see what I might have to do with this new Naked Call. I’m hoping the stock closes on Friday below $18 and the Call will expire. Either way, for the time being, I just put $2100 in my mattress.
Sell 5000 shares X @ $18.02
Profit +$2100
I’ll put this in my mattress but not too deep until I see what happens with my Naked Call.
Steve
The Options Coach