I just sold another 10 Square (SQ) Calls to start next week’s income.
I bought 1000 shares of SQ at $62.75 on 10/1/19, 1 month ago today. Since then I’ve sold Calls 5 weeks in a row without being assigned. The 5th Call expiring today at the close. With these 5 weeks of Calls I’ve brought in a total of $3600 in premiums. As I write the stock is up $1.25 (2%) on the day, and it’s at $62.68. Since it’s already up $1.25 today I feel it will not go to my Strike Price of $63 by the close. At least I hope not! I just sold another Call against these shares to expire next week. If I get assigned I will not have the shares to cover this Call to expire next Friday.
Sell to Open 10 SQ 11/8/19 $64.00 C @ $2.15 (+$2125)
The Call I just sold is the 6th, 10 contract Call I sold, but this one is a little different. And it could be a potential problem. Sq announces their earning next wednesday, before the my Expiration Date. I do not like to sell Calls on a stock that is about to announces earnings. This is big news and it could cause a big move in the stock. I really didn’t have much choice. I don’t think I’m gonna get assigned today so I feel I’ll own the stock going into Monday. The stock is a little lower than by buy-in price so I don’t want to sell the stock. I looked at the last 6 or 7 earnings dates and there’s no pattern of the stock going up into earnings. It’s very hard to predict what the stock will do before earnings. Since I already brought in $3600 in premiums, and I really like the stock, I decided to sell another Call with a large pre-earnings premium. I received $2.15 which is 3.4% of my buy-in price; this is on top of my lock-in $3600. If the earnings are good the stock will go up, and I’ll get assigned at $64 and keep the large premium. If the stock does not hit the earning’s mark, the stock will go down and I keep the premium. I figured I’ll probably own the stock anyway so I might as well grab the beautiful premium.
Since I feel I would own the stock through earnings, this trade does not add risk. However, since the earning’s report adds a little worry, either way I’ll give this trade a Risk Factor 2.
If I was not already in the stock I would not buy the stock for this deal. So if you mimic my trades, and you do not own the stock, I recommend to pass this one up.
I’m hoping the stock does not hit $63 by the end of the day. And I hope SQ comes out with good earnings and I get assigned for a very nice profit.
Successful Trading,
Steve
The Options Coach