I hope everyone enjoyed the weekend, ending with an entertaining Super Bowl. At half time I was worried we were gonna have another boring final game. But the 2nd half was a different story. Patrick Mahomes and the Chiefs came alive and the game turned out to be an exciting game. Congratulations to Andy Reid and the KC Chiefs on a great comeback and the Super Bowl Win.
As a basketball coach, I never liked a huge celebration before the game was over. When a team did it against my team I used it as motivation to get my team back in the game. Last night when the 49er’s had a crazy, full team, celebration in the end zone being up only 10 points, I felt it was a big mistake. There was way to much time left in the game. The Chiefs have a great comeback record and have one of the best, if not the best, QB in the league. From the point of the 49er’s end zone celebration forward it was all down hill. I felt they woke a lion!
If you’re a gambling person I hope you won some money. However, if you are stay away from being an options trader. If you are a gambling options trader you will lose money!
Having said that, I did make some moves this morning that carry a little more risk than my usual trades. I’m very concerned with the coronavirus and the market taking a huge drop. I do have a decent amount of money in my margin account, but when working on margin a huge drop in the market can present a big problem fast.
I am not fooled by today’s up market. It’s a nice bounce from Friday’s record drop but I feel we have pain ahead. If you are a Grasshopper I do not feel this is the time to learn with real money trades. Concentrate on paper trades and learn how a volatile market affects premiums. This is a great time to learn but not with real money. I will not be buying any more stock or LEAPS options. If I don’t already own the stock, and I want to make trades, it will be Naked Calls. I will not be happy until the coronavirus is under control. I want to see the number of new cases level off, or start to go down. If the cases continue to rise the health threat is not under control. If it’s not under control governments around the world will continue to take measures to get the virus under control, and any new measures will hurt the world economy.
I’m holding a few stocks that are lower than where I bought. When this happens if make it difficult to sell Calls against the shares. It’s tough getting a decent premium if the stock is lower. If you go down on the Strike Price to get a better premium, or any premium at all, your at risk of getting assigned at a price lower than your buy-in price.
This morning I placed orders to sell Calls on Micron (MU), Canopy (CGC), Weight Watchers (WW) and Jabil (JBL). With each order I used a Strike Price lower than my buy-in price. If I get assigned on any of these Calls I might take a loss on the stock sale. I say “might” because I have enough money to buy additional shares of one or two of the stocks if it looks like I’m gonna get assigned. But not enough to buy more shares on all 3 Calls. I would buy more shares so I don’t get assigned with the I don’t want to lose. I would buy more shares just to give the Call buyer to satisfy the assignment. I hope this makes sense. The bottom line is I don’t want to sell my existing stock at a loss.
Here are the Calls I sold this morning. They all get a Risk Factor 3 because of the possibility of getting assigned with a loss in the stock. My feeling is I will not get assigned because I feel the market will not continue up until the virus in under control.
Micron
I’m in MU at $57.50 and sold the $55 Call.
Sell to Open 10 MU 2/7/20 $55.00 C @ 50¢ (+$500)
Canopy
I’m in CGC at $25 and sold the $23.50 Call.
Sell to Open 5 CGC 2/7/20 $23.50 C @ 50¢ (+$250)
Weight Watchers
I’m in WW at $39.40 and sold the $35 Call.
Sell to Open 10 WW 2/7/20 $35.00 C @ 55¢ (+$550)
Jabil
I am not in this stock. I own 10 LEAPS with the Strike Price of $42. I sold 10 Calls against this LEAPS to form a Diagonal Bull Call Spread. This is when you sell a Call against an option. This LEAPS option gives me the right to buy 1000 shares at $42 and I sold a $42 Call to expire on 2/14/20. The stock was at $40.25 when I sold the Call. I don’t think I’ll get assigned but if I do I’ll have to buy the stock to deliver. I only received a 20¢ premium for $200. I’m trying to bring in as much as I can in this time of uncertainty.
Sold 10 JBL 2’14’20 $42.00 C @ 20¢ (+$200)
These are the Call I sold this morning. It’s clear I don’t want to get assigned on any one of them. I wanted to take advantage of the up day bringing in some money while the market is dropping. I feel the market will drop more.
I have one more trade to report. I’ve been bailing out of my DISH Calls that expire in June. I started with 10 Calls. Previously I sold 4 of the Calls and this morning I sold 2 more at a small loss.
9/16/19 – Buy to Open 2 DISH 6/19/20 $35.00 C @ $6.30 ($1260)
2/3/20 – Sell to Close 2 DISH 6/19/20 $35.00 C @ $5.00 ($1000)
Loss – $260
As I write DISH is up 12¢ but I sold the 2 Calls when it was up about 40¢. I’d like DISH to go up so I can get out of the remaining 4 Calls at less of a loss but I’ll be happy when this position is gone.
If you have any questions on today’s trades or my strategy send me an email.
Successful Trading,
Steve
The Options Coach