Sold my AMD Stock and Adjusted My AMD Call

Hi All, I’m sitting in my car writing this report with wifi from my hotspot. I just got done with physical therapy on my shoulder and I wanted to get this post out before the market closed. Before I went to therapy I placed a few trade orders and while I was away from my computer I was filled.

Just about a year ago I bought 2000 shares of Advanced Micro Devices (AMD) at $14.39. I sold Calls on these shares a few times but than the stock dropped down to $9 and I wasn’t able to get Calls sold without the risk of getting assigned below my buy-in price. Finally the stock started moving and 2 weeks ago with the stock at $13.70 I sold a 20 contract $14 Call. I was so sick of holding the stock, I was willing to take a little loss with assignment to get out. I took in a $400 premium but if assigned I would take a $780 loss. This was not a problem to me because I brought in premiums with past Calls so I was happy to move on.

The stock really moved the past few days and today it was up to $15.25. If I let my Call expire today I would have had a $1.25 “Opportunity Lost” because I would get assigned at $14, I would not get the gain on the stock. I decided to sell the stock with a nice gain of $1720.

6/26/17 – Buy 2000 Shares AMD @ $14.39

6/8/18 – Sold 2000 Shares AMD @ $15.25

Profit +$1720

 

The problem now is I’m obligated to deliver the stock, at the close today, which I no longer own. So, what I did was a “Roll-Out.” I did a “Buy to Close” on the option I sold which cost me $2500. With the $400 premium I received from the Call I sold, I am now down $2100. Next I did a “Roll-Out.” I sold another Call to bring in a premium to put me back on the plus side. I sold an AMD 20 contract Call not to expire until 7/27/18. This Call gave me a premium of $1.35 for $2700. With this new premium of $2700 I’m up $600. This new Call has a Strike Price of $15. Take a look at the trades I made that make up the “Roll-Out.”

Advanced Micro Devices Roll-Out

5/30/18 – Sell to Open 20 AMD 6/8/18 $14.00 C @ 20¢ (+$400)

6/8/18 – Buy to Close 20 AMD 6/8/18 $14.00 C @ $1.25 (-$2500)

6/8/18 – Sell to Open 20 AMD 7/27/18 $15.00 C @ $1.35 (+2700)

 

I did this for a few reasons. #1, I didn’t have an “Opportunity Lost” of $1.25 ($2500) because I was able to sell the stock at a nice gain. #2, Instead of keeping a $400 premium I’m hoping to make a total premium of $600 in addition to the stock gain. #3, Looking at the candlestick chart, I think AMD is going to pull back. Yesterday, which was a down day for the stock, there was a “Dark Cloud Cover.” This is when the red candlestick of the day completely engulfs the green candle of the day before. The red candle of yesterday completely engulfs the green candle of Wednesday. I believe we will see AMD slide a bit. If not, I’ll have to make some more adjustment trades to prevent me from losing money.

Rolling is a very important part of adjustment trades. If you have any questions please send me an email. Please look up “Dark Cloud Cover.”

Let’s see what happens. Have a great weekend!

 

Steve

The Options Coach