If you follow my “Active Positions” you know I have a 50 contract Call sold on GPRO expiring in January. Yesterday I sold my 5000 shares of GoPro (GPRO). While I locked in a nice profit of $3300, it also put me in a situation where I was Naked on the 50 contract Call. I sold the stock, even though it put me in a dangerous position, because GPRO has been moving lately and I don’t trust it’s going to continue up without a pullback. I have a $15 Call which doesn’t expire until January, 20, 2017. There’s a lot of time left. I bought the stock at $15.09 and sold at $15.75. That’s a gain of $.66. On 5000 shares the profit is $3300. I am hoping the stock will drop to below my $15 Strike Price. If this happens, I buy the stock back, keep the profit on the stock sale and have a Covered Call again.
I plan on buying the 5000 shares as soon as it drops below $15 so today I decided to bring in some premium while I wait for it to get below $15. I just got executed on a 50 contract, $14.50 Put expiring this Friday (4 days). I brought in a premium of $.15 for a total of $750 on 50 contracts. If the stock goes down to $14.50 I’ll have 5000 shares of GPRO put to me and I’ll have my Covered Call. If it doesn’t go down to $14.50 by Friday I keep the $750 premium and I’m in the same boat I’m in now. I planned on buying the shares if it goes below $15 so I might as well collect a premium while I wait for the drop, this is a “no brainer.” This is a very low risk trade! I give it a Risk Factor of 1.
Here’s the sell order for the Put:
Sell to Open 50 GPRO 8/19/16 $14.50 P @ $.15 (+$750)
I do not have coverage on Puts on this site yet but it’s coming soon. If you have any questions on this trade please send me an email.
Steve
The Options Coach