As of my last post I had Calls sold on all my stock holdings in preparation for today’s Fed announcement on interest rates. Even with and same amount of option contracts sold on all my shares, as share I own, I was still not comfortable with my 10,000 shares of U.S. Steel (X). With the stock at $17.60 I do have a $20 Call sold against these shares but on a big pullback a 10,000 share position can hurt me, even with a little insurance. I just decided to put a little more insurance on this position. I just sold another 100 contract Call on X but these Calls are Naked. I sold the 1/20/17 $21 Call (LEAP) and brought in a premium of $1.20 for $12,000. I feel a little better! Now, if the stock takes a hit I have the premium of my first Call ($7000) which I sold on Monday, plus I now have another $12,000 of insurance with today’s premium. The stock is at $17.60, If it goes up, my $20 Calls are covered. And if it goes up and approaches the Strike of $21 I’ll buy the stock to cover this LEAP. I don’t think it will get to this number today. This is a large Naked Call. Even though it’s $4 Out-of-the-Money and 4 months till expiration, I still give this a Risk Factor of 4. Here’s the LEAP sell order:
Sell to Open 100 X 1/20/17 $21 C @ $1.20 (+$12,000)
Fed announcement is 1 and a half hours away. Glued to my TV and computer!
Steve
The Options Coach