I just sold 10 Calls on Advanced Micro Devices (AMD), but this trade comes with a little story.
On 9/16/19 I bought 1000 share of AMD at $30.95 and sold a $31 Call at the same time. This Short Call gave me a premium of $600. When the Call expired on 9/20 I kept the $600 premium and I was not assigned. Again, on 9/23, I sold another $31 Call which gave me a $520 premium. This Call expired on 9/27 and again I was not assigned. At this point I brought in $1120 in premiums and I still own the stock. The only problem is the stock is a little too much below where I purchased to get a decent premium if I sold another $31 Call. As I write the stock is at $28.85. If I sell a $31 Call to expire next Friday I would only get a premium of 10¢. Thats only $100 and it’s not worth the trouble.
I did not get a Call sold on AMD this week and this does not sit well with me. If I’m holding 1000 shares of this stock I want to bring in weekly premium money.
While looking at my account I see I’ll have enough money in my account at the close today to buy another 1000 shares of AMD. I don’t want to buy another 1000 shares, but, the money is in my account if I wanted to.
While trying to figure a way to bring in a premium on this stock I came up with an idea. I originally bought the stock at $30.95 and the stock is at $28.85. I decided to sell a 10 contract $30 Call, which had a premium of 30¢, for $300. I don’t think the stock will hit $30 by next Friday, and I hope it doesn’t because if I’m assigned at $30 I’ll lose $1 on the stock sale for a loss of $950. I will not let this happen! If the stock approaches my Strike Price of $30 I’ll use the money available in my account to buy another 1000 shares to cover this Call. I will not use the stock I bought at $30.85. I’ll have to watch the stock very closely next week to see if it get to the $30 area.
Sell to Open 10 AMD 10/11/19 $30 C @ 30¢ (+$300)
This 30¢ might not seem like a great premium but it is 1%, 30¢ on a $30 stock. This trade fits into my “1 Week/1%” strategy. Even if I used my $30.95 stock to cover this Call and I got assigned I would end up ahead. Remember I already brought in $1120 in premium.
I do have to watch this trade closely if I don’t want to get assigned with my existing stock, so it gets a Risk Factor 2.
This $300 premium is the start of next week’s income. I’m hoping to add another $1000. Let’s see if I can do it.
Steve
The Options Coach