Advanced Micro Devices (AMD) is making a big move today with a down market. It is a hot stock but I don’t think it will go much higher. As I’ve been writing, it’s in “over bought” territory with an RSI in the 80 area. As I write the stock is up $1.30 and it’s at $26.50. With the shortened week I just sold 10 $27 Naked Calls to expire this Friday. I received a premium of 50¢ for $500. This is a 1.8% return for a 4 day trade. This is a very risky trade because it’s a Naked Call on a very hot stock. This trade gets a Risk Factor 5. To reduce the risk a little I placed a buy order to buy 1000 shares at $26.95. I don’t think it will get there before Friday but if it does I’ll get filled before it gets to my Strike Price to make a Covered Call. Remember, I’ll only get filled if the stock hits my buy price during market hours. If it blows past $26.95 while the market is closed I could have a problem. This is where the risk comes in.
Sell to Open 10 AMD 9/7/18 $27.00 C @ 50¢ (+$500)
Steve
The Options Coach