I had another very nice week of profit! The job’s report that came out before the opening on Friday messed with my plans for U.S. Steel (X) a little so I made an adjustment trade. At the close on Thursday, X was right at my Strike Price and was looking good for expiration. On Friday morning the job’s report came out with unbelievable numbers! Probably to good to be true! I’m sorry if I’m questioning Obama’s administration’s Dept. of Labor report but I believe they tweak the numbers where ever they can to look better during an election year. This report said June had the largest increase of jobs, for one month, EVER! With the Fed so afraid to raise rates tells me the economy is not doing well. The Dept. of Labor reported a 4.9 unemployment rate. Many economist feel it’s more like 8 or 9%, and maybe higher. I feel if the unemployment rate was below 5% the economy would be booming and the Fed would be raising interest rates. The economy is so weak they are contemplating negative interest rates, as many countries already did. I hope it don’t get to that.
With the great job’s report the market went up big! Which in turn, raised X to be In-the-Money. Since I wasn’t going to get assigned, which is what I wanted, I did a Roll Out. Go to my “Active Trades” to see the moves of the Roll Out.
This week I had two positions end. One with U.S. Steel (X) and one with Netflix (NFLX).
U.S. Steel
On Tuesday, July 5th I bought 5000 shares of X at $17.60 and sold an $18 Call to make a Covered Call. Wednesday the stock shot up to $18.02 and I felt it was going to head down. I sold the 5000 shares to grab a profit of $2100. It was a little scary because I left my $18 Call naked. My strategy is, I’d rather manage a Naked Call In-the-Money than hold 5000 shares and have the stock go down a point or 2. On Thursday I felt good because the stock was still around the $18 price and the candlestick chart looked like the stock was going to move down. Then the job’s report came out! The stock moved up to $19 so my Call didn’t expire on Friday. If I kept the 5000 shares this entire position would be over. But because I sold the shares I had to hold on to the Call and Roll it out. No biggie! I’ll just have to manage this position with adjustment trades. The good news is I put $2100 from the stock sale in my mattress. The profit from the $18 Call I’ll have to wait a few week for. Please follow this Roll Out with me. Managing positions to ensure a profit is a very important part of trading. Always remember, the road to success is not always a smooth ride. Many times you hit potholes and detours. You must learn to negotiate your way around the bumpy roads.
Total Profit +$2100
Netflix
Also on Tuesday I did a Covered Call on NFLX. I bought 1000 shares of the stock at $94.75 and sold 10 contracts of the NFLX $95.50 Calls expiring Friday. This Call gave me a premium of $1.05 ($1050).
NFLX has been very volatile lately so I was a little concerned about owning 1000 shares. It seems like there’s news coming out every day, both good and bad. After I bought the stock it was moving up and down. The scary part was when it moved down as low as $93. Jefferies, an investment bank downgraded the stock and gave it a price target of $80. This had me very nervous! Remember, when you own 1000 shares, your account moves $1000 on every $1 move in the stock. If the stock went down to $80 my account would have suffered over $14,000. This is why I like to get assigned. Even if there’s an Opportunity Lost. With the job’s reports NFLX went up to $97.06. With the stock going In-the-Money my Call expired and I was assigned. This made me very happy. On a 4 day deal, I keep the premium of $1050 and I made $750 on the stock. The total profit was $1800. I love it! Many people would be very upset with the Opportunity Lost. Not Me! I take the money and run!
Total Profit +$1800
Weekly Profit +$3900
Overall I’m very happy with the week. The only pothole I hit was I had to Roll Out U.S. Steel.
Monday I’m hoping U.S. Steel takes a $1 drop. I have a $15 Covered Call expiring Friday. This is $4 In-the-Money but it’s covered because I bought the stock at $14.95 on the BREXIT fallout. This will have a nice profit for next week. This $15 Call is not the problem. The problem is I also have an $18 Naked Call expiring this week and an $18.50 (on the Roll Out) expiring in 2 weeks. This is why I want X to drop a bit. If you want to see all these trades be profitable, you must read “Main Street beats Wall Street.” There is a lot to learn in the next few weeks with my adjustment trades.
Have a great weekend!
Steve
The Options Coach