I just sold my first options of 2018. On 12/11/17 I bought 1000 shares of RH at $102.78. On 1/3/18 I bought another 500 shares at $89.75 and on 1/5/18 I bought 500 shares at $91.25. I now own a total of 2000 shares.
On my two purchases of 500 shares at $89.75 and $91.25 I sold 10 contracts of the RH 1/19/18 $99 Calls. I received a premium of 75¢ for $750. When I sold these Call the stock was in the $96.10 area. I went out to the $99 Call because I’d rather not get assigned. But, if I do get assigned, I’ll make a nice profit on the stock and I’ll keep my premium. If I don’t get assigned I’ll continue to sell Calls.
1/3/18 – Buy 500 Shares RH @ $89.75
1/5/18 – Buy 500 SharesRH @ $91.25
1/17/18 – Sell to Open 10 RH 1/19/18 $99.00 C @ 75¢ (+$750)
This second Call is a little different. After I sold the first Call I wanted to do something with my other 1000 shares but I couldn’t get a nice premium because I bought these shares at $102.78. The $103 premiums were only in the 15¢ area. I decided to take a little chance and sell a $100 Call, a little further out. Once the market is closed today I’ll only have 2 days until expiration. I don’t feel the stock will hit $100 by Friday so I took a chance. I sold the RH 1/19/18 $100.00 Call for a premium of 55¢ for $550. If I get assigned I’ll make another $4 on the stock but I’ll take a $2.78 loss on the stock sale. I don’t want the stock to get to $100 and I don’t think it will, but if it does I take the loss and move on. As I write the stock is backing off a little.
12/11/17 – Buy 1000 Shares RH @ 102.78
1/17/18 – Sell to Open 10 RH 1/19/18 $100.00 C @ 55¢ (+$550)
The first Call is Out-of-the-Money and it’s sold against previously owned stock so it gets a Risk Factor 1.
The second Call is an In-the-Money Call but the stock is Out-of-the-Money by $4. Even though the stock is Out-of-the-Money now I still have a chance to lose money if the stock goes above $100, so this trade gets a Risk Factor 3.
Steve
The Options Coach