Last week I did a “Triple Play Hedge” with Skechers (SKX). A “Triple Play Hedge” is when I buy shares of a stock and sell three Call. In this case I bought 1000 shares of SKX at $26.75 and sold three 10 contract Call. This “Triple Play Hedge” is on it’s second leg which expires today. The first leg expired last week. The Strike Price of today’s Call is $27.50. The stock was as high as $27.87 today. With the stock moving down I just sold the 1000 shares, that are covering this Call, at $27.50. The indicators show me that the stock will continue down. I wanted to get assigned at the Strike Price so when the stock was moving down I decided to sell at the Strike Price. It’s a little bit of a gamble because I am now Naked on the Call expiring today. If I kept the stock and it continued down I would not get assigned and I would start losing money on the stock. As I write, the stock is down to $27.33. I want the stock to stay below the Strike Price of $27.50 so I don’t have to deliver the stock. If the stock starts back up I might have to buy it back to cover my expiring Call. At this point I sold the stock for a 75¢ gain for $750 on the 1000 shares. Here’s the orders:
Sell 1000 Shares SKX @ $27.50
Profit +$750
If you are watching my “Triple Play Hedge” trades closely make sure you understand how they work by reading my page. I know it can get a little complicated for Grasshoppers but hang in there. There’s a lot of money to be made. If you have a question, send me an email.
Steve
The Options Coach