Yesterday I sold my 500 shares of Square. I felt it was gonna start running out of gas, or at least level off. I decided to take that money and put it in RH. So when I sold the 500 shares of SQ I bought 500 shares of RH. SQ is down today but up a little since I sold yesterday. However, RH is up $5 since I bought yesterday.
I now own 1000 shares of RH with earnings coming this Monday. I decided to play the earnings for the huge premium. With the stock at $104.50 I sold the $115 Call for a premium of $3.40. This option will expire next Friday and I received a premium of $3400 on my 10 contracts. Many feel the earnings will be great, but that really means nothing. The way I’m looking at this is if the earnings are good the stock can go up big. If the stock goes up to my Strike Price of $115 I will make another $10,000 on the stock, plus the $3400 premium. If the earnings are not good the stock will go down, however, I’m bringing in a $3400 premium to hedge the possible loss. And if the stock does go down I don’t think it will stay down very long.
Sell to Open 10 RH 6/15/18 $115.00 C @ $3.40 (+$3400)
This trade is a Covered Call and would normally gat a Risk Factor 1 but with earnings coming there is a little more risk. I give this trade a Risk Factor 3. RH is a very volatile stock and with bad earnings the stock can flop $20. Let’s hope that doesn’t happen.
Steve
The Options Coach