It’s Friday night and I’m home lying low. I’m hanging out thinking about this weeks trading and how excited I am about how my 3 Triple Play Hedges are working out; Weighers Watchers, Skechers and Micron. Weight Watchers is done and Skechers and Micron have one more leg to go. This is not my week ending results post but this week I’m up $6850.
I get emails about my strategies and why I change them up. I believe most Main Street beats Wall Street readers know I can make money but they want to know why I do a few different strategies. I think traders are constantly trying different strategies looking for an edge with less risk. Right now I’m on a roll with my “Triple Play Hedge” plays. I feel if I keep looking and concentrating on finding stocks and options with the correct premiums, this can be a great strategy. Here’s a short list of reasons why I like the strategy.
- With a 10 contract “Triple Play Hedge” you buy 1000 shares and sell three 10 contract Calls. If working on margin, which I do, you only pay margin interest on the 1000 shares, not the three Calls.
- The three Call have three different Strike Prices. The first Call is covered, if the stock goes up I can cover each Call as I have to with the buying of more stock. If it doesn’t go up I never have to cover the Call and the Calls expire, one at a time.
- If you do a Covered Call, the safest option strategy according to most, the Call gives you hedging. If the stock goes down you have the premium from selling the Call to counter the loss from the stock going down. With the “Triple Play Hedge” you have three Call’s premiums as hedging. The key is finding good stocks that won’t go down big. If it does, because it’s a good stock hopefully it will return back up soon.
- If you pick a good stock and it goes down, you only have 1000 shares but you have three Call expiring and keeping the premiums. If the stock goes up slow the Calls might expire before the stock gets to the next Strike Price. If it goes up faster, you can cover the calls, hopefully before the stock gets higher than your next Strike Price.
Below is the Weight Watchers “Triple Play Hedge” that expired today.
Buy 2000 Shares WTW @ $26.75
Sell to Open 10 WTW 6/2/17 $26 C @ 55¢ (+$550)
Sell to Open 20 WTW 6/9/17 $27 C @ 60¢ (+$1200)
Sell to Open 20 WTW 6/16/17 $28 C @ 50¢ (+$1000)
I bought the stock at $26.75 and was assigned today at $28 with the last Call. This profit was $1.25 on 2000 shares for a total of $2500 on the stock. In addition I keep the three premiums, $550, $1200 and $1000. A total of $2750 in premiums. The stock gain plus the Premiums is a total of $5200. It would have been more but if you notice on my first Call I only did 10 contracts by mistake. I brought in $550 and it would have been $1100 if no mistake.
With this “Triple Play Hedge” I invested $53,500 on the 2000 shares and brought in a total of $5200. I started the trades on May 31st and it was over today, June 16th. A 17 day deal! The Rate of Return is 9.7%.
I had a few more trades this week coming to an end. This $5200 plus the gains from the other trades gave me a weekly profit of $6850. Watch for my Results Week Ending 6/16/17.
The success of this “Triple Play Hedge” and the others, that should finish up next week are the reason for my excitement. If I can consistently find good situations with good stocks, I feel the “triple Play Hedge” can be the source of a lot of money.
Be careful! Slow and steady, steady and slow. The tortoise wins the race!
Any questions, send an email.
Steve
The Options Coach