Selling Naked Calls is still my favorite strategy. I love having Calls expire and never having to buy the stock. I just sold a Naked Call on Weight Watchers (WTW). The stock was at $29.45 and I sold the $30 Call. Selling Naked Calls is a high risk strategy so I must stay near my computer or place a buy order for the shares in the case the stock price approaches my Strike Price. I sold 20 contracts of the WTW 6/23/17 $30 Call for a premium of 60¢ for a total of $1200. If I’m going to be away from my computer I’ll place an order to buy the 2000 shares at $29.90. If the stock goes up while I’m away my broker will buy the shares at $29.90 to cover my Call before it gets above my Strike Price of $30. At the moment it’s a Naked Call so it gets a Risk Factor 5. If I cover the Call by owning the 2000 shares the Risk Factor will go to a 1. Here’s the sell order:
Sell to Open 20 WTW 6/23/17 $30 C @ 60¢ (+$1200)
This Call gave me a 60¢ premium on a stock just under $30. This 5 day trade gives me a Rate of Return of 2%. Thie fits into my “1 Week/1%” strategy.
Steve
The Options Coach
You mean a buy-stop order don’t you?
That’s correct Tony! Thank you for reading.
Steve