Last week I bought 500 shares of RH at $45.80 because I thought it was time for it to move. The stock did move and I bought another 500 shares yesterday at $50.20. With this not being earnings season, looking at the earnings schedule was not on my mind. Today I was looking to sell a Call on my 1000 shares and I noticed the premiums were very high. These high premiums had me do a little investigation into company news. The first thing I noticed, the earnings come out today after the close. Not Happy! There are a number of things I could do. One is to just sell my shares and take the profit on the stock. Two is just hold and hope for the best. Three is I could sell a Call with the very high premiums to get some insurance in the case the stock goes down after the announcement. I looked at my account and I was happy with what I saw so I decided to hold the stock and sell a Call. It’s a bit of a gamble but I was happy with my account. This is the type of gambling you should avoid if you get into options. I hope I don’t regret this move. I sold 10 contracts of the RH 9/8/17 $53 Calls. They will expire this Friday. The good part is I got a $3.20 premium. Well, it sounds good now. I hope it sounds just as good at 10 minutes after the close. This is a very dangerous trade so even though it’s a Covered Call it gets a Risk Factor 5.
Sell to Open 10 RH 9/8/17 $53 C @ $3.20 (+$3200)
I bought my first 500 share at $45.80. If the earnings are good, this would be a great gain. If the earnings are bad, I give back all my profit! But keep the premium. The second 500 shares I bought at $50.20.
This is a big gamble! The main reason I did it is I like the price of the stock. Even if the stock goes down, I’m hoping it will rebound faster because it’s low compared to a few months ago.
Steve
The Options Coach
Before I hit send on the above post I got spooked! The stock went up to $50.40 and I decided to cut my position in half. The 500 shares I bought at $45.80 I sold at $50.40 with a $4.60 profit. On the 500 shares thats a $2300 profit. I feel better!
Buy 500 Shares RH @ $45.80
Sell 500 Shares RH @ $50.40
Profit +$2300
Now I’m trying to get out of 5 of the options contracts I sold. This is LIVE TRADING!
Once I’m out of 5 of the 10 contracts I sold, I’ll be left with 500 Shares at $50.20 and I’ll still have 5 contracts of the $53 Calls going into earnings.
I was just executed on the Buy to Close order for the 5 contracts. I sold for $3.20 and I just got out with the Buy to Close for 3.00, for a 20¢ profit on the option I sold at the beginning of this post. On the 5 contracts I got out of I made $100.
Sell to Open 10 RH 9/8/17 $53 C @ $3.20
Buy to Close 5 RH 9/8/17 $53 C @ 3.00
Profit +$100
The bottom line is I still have 500 share of RH and a 5 contract Call sold against this. I feel much better going into earnings with half the position I had a half hour ago. I hope this post make sense to all. If not send me an email.
Let’s see what earnings do in about 15 minutes.
Steve
The Options Coach