A little while ago I was looking a Micron (MU) to sell a Call to expire this Friday. The stock was in the $22.55 area, down from the high of the day $22.84. Watching both the daily and 1 minute candlestick charts I felt the stock was going to stay a little lower. With the stock at $22.55 I sold 30 contracts of the 1/6/17 $22.50 Calls for a 35¢ premium (+$1050). I like the stock and I don’t think it will take a big drop so I also want to buy the 3000 shares to make this trade a Covered Call. However, the stock didn’t get below my Strike Price yet. I will watch it closely and buy the shares if it gets below $22.50. I do want a Covered Call but at the moment it’s a Naked Call so I give the trade a Risk Factor of 5. If and when I get the stock the Risk Factor will go to a 1. Here’s the sell order and hopefully I’ll be posting the buy order for the stock soon.
Sell to Open 30 MU 1/6/17 $22.50 C @ 35¢ (+$1050)
2nd trade of 2017! Feels good!
Steve
The Options Coach