Yesterday I did a “Triple Play Hedge” with Micron (MU). I started with 1000 shares and sold 3 Call to complete the trade. I bought the original 1000 shares at $29.85 and sold the 3 Call with the Strike Price’s of $30, $31 and $31. Shortly after I was executed on the 4 trade to make the “Triple Play Hedge,” the stock started up as the NASDAQ was recovering from a few days down. My $30 Call was covered, but as the stock was moving up MU was approaching the $31 Strike Prices. Yesterday as this was happening I decided to buy another 1000 shares to cover one of my $31 Calls which is expiring this Friday. The other $31 Call is expiring next Friday. This gives me a little time so I wasn’t as worried about covering this $31 Call. Today the NASDAQ and MU opened higher which had me a little concerned about my second $31 Call which was still Naked. The stock went all the way up to $32.24. This meant my $31 Call was $1.24 In-the-Money. VERY DANGEROUS!
A little while ago the NASDAQ started down and along went MU. MU came all the way down below my $31 Strike Price Call so I decided to cover the last Naked Call of the “Triple Play Hedge” with the buying of another 1000 shares. I got in for $30.91.
Actually, this means I no longer have a “Triple Play Hedge” on MU, I have 3 Covered Calls. I now have 3000 shares of MU and 3 Calls sold against this shares. 2 of the Covered Calls expire this Friday and the last Call expires next Friday. As I write MU is back up to $31.25. At this point I’m very happy with my moves making 3 Covered Calls. I’ll leave the “Triple Play Hedge” listed in my Active Positions because I don’t know what will happen in the next 3 days. Maybe I’ll sell the shares, I don’t know! I started the trade as a “Triple Play Hedge” so I’ll leave it as is in my Active Positions. Here’s the buy order for the shares:
Buy 1000 Shares MU @ $30.91
This is what trading options is all about, making adjustment trades! You must get good at this. With the way MU moves, I’m very happy owning the shares for the Covered Calls. I’m hoping the NASDAQ has a little run after the pullback the last few days. Let’s watch and see how these MU positions play out.
Steve
The Options Coach