The coronavirus has many investors unsure what to do, and I’m no exception. As I’ve been writing, I’m very nervous. Today was a down day but the market has been shrugging off the potential problem this virus can cause.
My nervousness has me a little unsure of which way I want to play my position. In fact this week I made two mistakes and they caused me to lose some money.
The two mistakes involve Micron and Weight Watchers. I’ll explain one at a time.
On 1/13 I bought 1000 shares of Micron at $57.50. At that time I also sold a $58 Call. I did not get assigned and kept my $400 premium. After this the stock came straight down for about 6 days on virus fear. On 2/3 with the stock down to $53.60 I figured the Virus was gonna hurt the market for a while. When you’re a trader you try to find ways to bring in money even when the market is going down. There was huge investors talking about how they felt the market was in for some big trouble. I decided to play Micron like it was going down for a while. With the stock at $53.60 I sold a $55 Call bringing in a $500 premium. As “Murphy’s Law would have it, as soon as I sold the Call the stock shot up. I bought the stock at $57.50, I didn’t want to get assigned at my Strike Price of $55. When I sold the Call I figured the stock was going down and I wouldn’t get assigned. Today at the close Micron was at $56.90. I was set to get assigned. I decided to take a loss and do a “Buy to Close” to get out of the obligation to deliver the stock. Micron received a few upgrades this week so I decided to hold on to the stock. I could have accepted assignment losing $2500 on the stock, or I could have done a Roll-Out. I decided to just do the “Buy to Close” and keep my stock and take a $1400 loss. I sold the Call for a $500 and it cost me $1900 to close the position.
2/3/20 – Sell to Open 10 MU 2/7/20 $55.00 C @ 50¢ (+$500)
2/7/20 – Buy to Close 10 MU 2/7/20 $55.00 C @ $1.90 (-$1900)
Loss -$1400
On assignment I would have lost $2500 on the stock sale. I’m hoping the stock moves higher next week and I get my loss back.
With Weight Watchers I had the same problem. I bought the stock at $39.40, and like Micron the stock went down. It went all the way down to $33.90 when I sold a $35 Call. At the close today the stock was at $35.99 and I was set to get assigned. I did the same as with Micron. I did a “Buy to Close” so I didn’t take a big loss on the stock. However, I did take a loss on the option. I sold the Call for a $550 premium and the “Buy to Close” cost me $1100, taking a $550 loss.
2/3/20 – Sell to Open 10 WW 2/7/20 $35.00 C @ 55¢ (+$550)
2/7/20 – Buy to Close 10 WW 2/7/20 $35.00 C @ $1.10 (-$1100)
Loss -$550
For my last trade to report, I sold 100 shares of Apple. On 1/21 I bought 200 shares of Apple at $317.50 and sold a Call. I didn’t get assigned. Today I was still holding the 200 shares. To free up some money I sold 100 of the shares at $320. I’ll see what I’m gonna do with the other 100 shares on Monday
1/21/20 – Buy 100 Shares AAPL @ $317.50
2/7/20 – Sell 100 Shares AAPL @ $320.00
Profit+$250
I’m not very happy about the losses I took this week! But I’ve been doing great and I’m just gonna have to accept them. I figured with the market moving the way it’s been placing the two “Buy to Close” orders was better than carrying the options with Roll-Outs. I’ll get it back!
Have a great weekend!
Successful trading,
Steve
The Options Coach