What a wild run for RH after the earnings announcement after the close yesterday. The stock is up 41%. Crazy! With the stock up and starting to level off a bit I just sold a 5 contract Buy-Write. I bought 500 shares at $69.75 and sold 5 contract of the 9/15/17 $70 Calls for a premium of $2.25. Thats $1125 on the 5 contracts. Getting a $2.25 premium on a $69.75 stock is a 3.2% return for a 9 day Call. If I get assigned it will be 3.5% because of the stock sale. I really don’t think RH will be at $70 in 9 days. Where it will be after such a huge run up is anyone’s guess. I think, with the great earnings, in the long term the stock will go up over $75 but there could be a pullback in the short term with some profit taking. This is a Covered Call on a very hot stock so I give this trade a Risk Factor 1. I think it’s a very safe trade but there could be a big Opportunity Lost. No problem!
RH Buy-Write
Buy 500 Shares RH @ $69.75
Sell to Open 5 RH 9/15/17 $70 C @ $2.25 (+$1125)
This should be an interesting week for RH! As I write the stock is already up to $71. lol Unbelievable!
Steve
The Options Coach