Results Week Ending 3/31/17

What a crazy week with RH. It’s not good when you have Short Naked Calls on a company that keeps going up. In my weekly report I’ll let you know what I’m doing, to hopefully, prevent me from losing money.

U.S. Steel, AK Steel and Dick’s Sporting Goods are all below where I bought the stock and I didn’t like any option’s premium that was worth putting my shares at risk of assignment. In addition to my RH positions, the only other position that brought in a little money is my 1000 shares of Dick’s Sporting Goods (DKS). On my 1000 shares I received a qualified dividend of $170.

Profit +$170

Let’s see if I can make some sense of my RH positions. Last Friday’s ExpirationDay I had a 30 contract Call expire but the shares were In-the-Money. This means I had to deliver the 3000 shares. The Strike Price was $36.50. With the stock above the Strike Price I borrowed the 3000 shares from my broker and delivered them at $36.50. On this past Monday RH went down and I was able to buy the shares at $36.25 to return the borrowed shares. With the shares going down while I was Short, I made 25¢ on the stock. On the 3000 shares that’s $750. With the stock going down on my short position it was a nice start to the week. The way you close a short position is you buy the shares. Here’s the orders:

3/24/17 – Short 3000 Shares RH @ $36.50

3/27/17 – Buy 3000 Shares RH @ $36.25

Profit +$750

Also on Monday I sold 10 contracts of the RH 3/31/17 $37.50 Calls. On Tuesday I bought the stock to cover this Call. I bought the 1000 shares at $36.69. On the same day the stock went up and I decided to sell the shares to make the stock profit and go back Naked on the Call. I felt the stock was gonna go down. I sold the 1000 shares at $37.90. This made me $1.21 on the stock sale but I was Naked on an In-the-Money Short Call. Here’s the Stock buy and sell orders:

3/28/17 – Buy 1000 Shares RH @ $36.69

3/28/17 – Sell 1000 Shares RH @ $37.90

Profit +$1210

RH went on a crazy ride for the rest of the week and put me in a bad position. The stock closed on Friday at the very high price of $46.26. Because of the call mentioned above, I went Naked on, I had to deliver the stock at $37.50. I could do a “Roll-out,” or borrow the shares and go Short on the 1000 shares. I decided to keep the premium I received for the Call and go Short on the shares. The stock got a downgrade this week by Goldman so I’m hoping it will start to come down. Here’s the sell and expiration orders of the Call Option I sold:

3/27/17 – Sell to Open 10 RH 3/31/17 $37.50 C @ $1.00 (+$1000)

3/31/17 – Expired 10 RH 3/31/17 $37.50 C

Profit +$1000

I know this has to start getting confusing! Please email me any questions you might have on this trade because it gets worse. Along with the Short Call I’m writing about I also sold another Call on Wednesday. I sold a 15 contract RH 3/31/17 $39 Call for a premium of 90¢ ($1350). This Call I decided not to let expire and go short on the shares. I did not want to have a short position of 2500 shares. The 1000 from the trade above, plus the 1500 from this trade. On this Call I decided to do a “Roll-out.” This is when you buy back your Calls and sell another Call further out to help prevent you from losing money. Please read my page on “Rolling.” With a Roll-out you can enter the trade as one. the trade includes the “Buy to Close” and the “Sell to Open” as one trade. However, many times I enter the trade as two trades. I enter the “Buy to Close” as a trade and the “Sell to Open” as another trade. This is what I did this time. The result was, I was executed on the “Buy to Close” and my “Sell to Open” is still open. I will get this executed on Monday and I’ll report the trade in a post then.

I know this RH positions are getting complicated and there not going my way, so let’s watch and see how I can get out of this with minimal loss.

Total Weekly Gain +$3130

I am well aware I still have some bad positions, but this $3130 is in my mattress!

Have a great weekend!

Steve

The Options Coach