Hi Main Street beats Wall Street readers! I’m away again! I came to Boston for the weekend, actually a little longer; I left NYC early Thursday morning. For those who don’t know, my wife is a comedian. One of her good friends put her on a show at one of the top comedy clubs here. If you’re into comedy give them a Google or check them on FaceBook. My wife’s name is Irene Bremis and her close friend is Rachael Feinstein. They are doing 4 shows in 3 nights. Tonight is a double. I’ll be back in my office on Monday morning.
I have a few trades to report. All trades coming to an end this Friday had to do with my “Triple Play Hedge“ trades. For you who don’t know what this type of trade is please read my page by hitting the link. This trade is a strategy of mine I came up with about 2 years ago. I buy a stock and sell 3 Calls Options on the one stock. One Call would be Covered (because I own the stock) and the other 2 are Naked. I named it “Triple Play Hedge” because I sell 3 Calls. When you sell a Call on a stock it acts as hedging (insurance) if the stock goes down. I sell 3 Calls to get more hedging on the one stock. So, selling the 3 Calls for hedging, I came up with the name “Triple Play Hedge.”
Last week I did a “Triple Play Hedge” trade on Weight Watchers (WTW) and this week I did one on Skechers (SKX). Again, you must read the page so you know how the trade works. When I sell 3 Calls, one Call will expire each week for 3 weeks. This week the second Call expired for WTW and the first Call expired for SKX. Let’s take a look at one at a time.
Weight Watchers
Last week on expiration day, the first Call expired, and I was assigned on my stock because at the close of the market the Call was In-the-Money. I was left with 2 remaining Call and no stock. With the stock going up and approaching the second Strike Price I bought another 2000 shares to cover the second Call. The Calls are 20 contracts. This week, with the stock taking a little dip, I was not assigned when the second Call expired. The expiring of the second Call left me with the premium in my account. That premium was $1200. Now I’m left with the 2000 shares of the stock and one more Call. If all goes well, next week the “Triple Play Hedge” will be over. I’m hoping the stock goes up a little and I get assigned. If that happens the “Triple Play Hedge” will be a success. Take a look at the WTW “Triple Play Hedge” below and you’ll see all the legs of the trade.
6/1/17 – Buy 2000 Shares WTW @ $26.75
5/31/17 – Sell to Open 10 WTW 6/2/17 $26 C @ 55¢ (+$550) Expired/Closed
5/31/17 – Sell to Open 20 WTW 6/9/17 $27 C @ 60¢ (+$1200) Expired/Closed
5/31/17 – Sell to Open 20 WTW 6/16/17 $28 C @ 50¢ (+$1000) Covered
As you can the first 2 Calls are Expired/Closed. I only have the last Call to go which expires next Friday 6/16/17. The money I made this week is the middle Call’s premium which is $1200.
Profit +$1200
Skechers
With SKX, this week was the expiration of the first Call. This was only a 10 contract “Triple Play Hedge.” With SKX the stock was moving a little faster than WTW. As normal, I started the trade with the stock; in this case 1000 shares of SKX. During the first week the stock moved past the first Call’s Strike Price (which was covered), and approached the Strike Price of the second Call. At this point I bought another 1000 shares to cover the second Call. On expression day, this Friday, the first Call expired and I was assigned on 1000 shares of the stock. Now I’m left with the second and third Calls and 1000 shares of the stock. This “Triple Play Hedge” is moving perfectly and I’m right where I want to be. Take a look at the positions below.
6/6/17 – Buy 1000 Shares SKX @ $26.75
6/5/17 – Sell to Open 10 SKX 6/9/17 $27 C @ 45¢ (+$450) Expired/Closed
6/5/17 – Sell to Open 10 SKX 6/16/17 $27.50 C @ 50¢ (+$500) Covered
6/5/17 – Sell to Open 10 SKX 6/23/17 $28 C @ 55¢ (+$550)
With SKX, only the first leg is expired as indicated with Expired/Closed. The second leg will expire next week and that Call is covered. The next Call will expire in 2 weeks on 6/23/17 and it’s still Naked. The profit for this week is from the expired first Call which is $450.
Profit +$450
When the first Call expired I was assigned on 1000 shares of SKX at $27. I bought the stock at $26.90. The profit on the stock sale from assignment is 10¢. On the 1000 shares that’s $100.
Profit +$100
Not a bad week! I aim for a little more but I’m not gonna complain. $1750 is $1750! I’ll take it and put it in my mattress.
You’ll see me doing many Triple Play Hedges so please read the page and completely understand how they work. If you have any questions please send me an email. I don’t want anyone losing money.
I’m putting a little thought into doing a youtube video on the “Triple Play Hedge” strategy. I’ll let you know.
Total Weekly Gain +$1750
Enjoy the rest of the weekend!
Steve
The Options Coach