On Wednesday I posted that I did a “Triple Play Hedge” with Weight Watchers (WTW). I reported that I bought 1000 shares of WTW and sold three 10 contract Calls to make the “Triple Play Hedge.” Yesterday while watching the position I realized I made a mistake when placing the order. As reported in my post, I did buy 1000 shares of the stock and sold a 10 contract Call to make a Covered Call. This Strike Price was a $26 Call. The mistake came when I placed the order for the next two Calls to make the “Triple Play Hedge.” When placing these orders I mistakenly entered 20 contracts and NOT 10 contracts. The first Call ($26), which is a 10 contract Call, expires today. But the Calls expiring next Friday the 9th ($27 Call), and the following Friday the 16th ($28 Call), both are 20 contract Calls. When I noticed the error it wasn’t a big deal because both of the Calls were Out-of-the-Money, however, the stock was moving up. When the stock got near the second Call’s Strike Price I bought 2000 more shares at $26.75 to cover the $27 Call. Because of my crazy workload I didn’t get to post that trade. I did post it in my “Active Positions.” I know this gets very confusing, especially for Grasshoppers, but mistakes happen. You must be very careful! Anyone who made numerous trades in their life knows what I’m talking about.
At the moment I have a 10 contract Call expiring today. This Call was covered from the start. I will be assigned today on this Call because it’s In-the-Money by $1.50. I have a 20 contract $27 Call expiring next Friday. This Call is Covered so I’m safe. The last 20 contract Call of the “Triple Play Hedge”, is a $28 Call and this Call is Naked. As I write the stock is at $27.44. If it get close to my $28 Strike Price I’ll buy another 2000 shares to cover this Call also.
If you have any questions on what a “Triple Play Hedge” is you can read the page and you can also send me an email. This is a great strategy and it would be good for you to completely understand.
Also, if you have any questions on my mistake, send me an email. Believe it or not, these mistakes are very common. No matter how careful you are. It happens!
Steve
The Options Coach