This was another great week! I love having a week where I put over 10 grand in my mattress, dealing with only one stock! That’s what I did this week. I only had positions expiring with Yelp (YELP).
If you look at my “Trade History” or “Active Trades/Current Positions” you will see I sold a Naked Call on YELP. On 7/25/16 I sold 50 contracts of the YELP $30.50 Calls expiring four days later on 7/29/16. When Friday 7/29/16 came around YELP had made a move and I was In-the-Money. Meaning YELP was above my Strike Price. I had to make an adjustment trade which was a Roll Out. If you look at the trades below, you will see when I sold the Call I received a premium of $.35. On the 50 contracts (5000 shares) the total premium was $1750. If you’re a Grasshopper and don’t understand the “Option Order form” please hit the link and understand each figure in the order form.
Sell to Open 50 YELP 7/29/16 $30.50 C @ $.35 (+$1750)
You can see this option brought in $1750. Since, on Expiration Day, I was In-the-Money I had to do a Roll Out or I would have had to deliver the stock which would have made me lose money. The stock was at $32. I would have had to buy the 5000 shares at $32 and deliver them for my Strike Price of $30.50. I would have lose $1.50 on the 5000 shares for a total of $7500. You know I didn’t want to do that! So I did a Roll Out adjustment trade. This entailed buying back my Call and Rolling Out with the selling of another Call. It cost me $1.55 to buy back the Call. On the 50 contracts it cost me $7750. That in it’s self was very scary. You must have a stomach for this business. Below is the “buy to close” order.
Buy to Close 50 YELP 7/29/16 $30.50 C @ $1.55 (-$7750)
At this point I was down $6000. I brought in $1750 by selling the Call and paid out $7750 with the buying back of the Call, -$6000. Below you will see the order form for the selling of the Rolled Out Call. Selling this Call brought in $1.50 for a total of $7500. This sale completed the Roll Out adjustment trade.
Sell to Open 50 YELP 8/12/16 $34.50 C @ $1.50 (+$7500)
With this Call I was able to get a nice premium ($1.50) going out only two weeks because the earnings report was due out during this week. The premiums were very high. I was also able to raise my Strike Price to $34.50. Because I was expecting good earnings I covered this Call with the buying of the 5000 shares at $32.75. I will get into this part of the trade below. It worked out that earnings came out great and YELP took off and on expiration day the stock closed at $38.48. Now I had a Covered Call so my Call Option expired and I keep all the premium. Let’s review the numbers for the Roll Out. First Call sold +$1750, buy back Call -$7750, second Call sold +$7500. Add these numbers and you will see I came out +$1500. This is the power of a Roll Out. I turned a -$6000 to a +$1500 with a Roll Out. This Roll Out worked out great!
Profit +$1500
As you just read, on 8/9/16 I bought the 5000 shares to make the above Naked Call a Covered Call. I bought the stock at $32.75. My Strike Price was $34.50. The stock went up and closed on Expiration Day $38.48. I delivered the stock at the Strike Price of $34.50 and made a profit of $1.75. On the 5000 shares that’s $8750. I did have an “Opportunity Lost” of $3.98. Meaning, if I never sold the Call and only owned the stock, I would have made an additional profit of $19,900. If you don’t know how I feel about “Opportunity Lose” yet, please hit the link and read about it. I DON’T CARE! I’m in this business to sell Calls, take a profit and move on, PERIOD! Here’s the order forms for the stock buy and sell with assignment.
Buy 5000 shares YELP @ $32.75
Assigned (Sell) 5000 shares YELP @ $34.50
Profit +$8750
As a result of me doing a Roll Out, I made money on the options, and if I wasn’t involved in the options, I wouldn’t have bought the stock. So the Roll Out was the reason I made this profit this week.
Total Weekly Profit +$10,250
This money is in my freak’in mattress
What a great week being involved in one stock.
As always, please email me with any questions. If it get complicated don’t get discouraged. Keep studying and send me questions. I’m here for you! There’s a lot of money to be made. People ask me why I put so much time into this game. Look at my weekly profit, that’s why! While you’re painting your house, I’m hiring someone to paint my house, while I’m in my office.
Have a great Weekend! Back to work Monday.
Steve
The Options Coach