If you read yesterday’s post you saw I sold a Call on my 3000 shares of Netflix (NFLX). About 4 hours later I bought them back giving me a $1200 profit. End of deal! Money in the mattress! Well, about 5 minutes ago I sold another Call on the same NFLX shares because they were freed up when I bought back the Call yesterday. I bought them back yesterday because the stock took a dip and it gave me an opportunity to get out of the deal with a profit. Today the stock opened lower but came back strong. Yesterday I sold the $110 Calls but today I was able to get a nice premium with the $112 Calls. Having the higher Strike Price gives me the potential to make more money on the stock while still getting a nice premium. Today I sold 30 contracts of the NFLX 1/8/16 $112 Calls and I received a premium of $1.05. On the 30 contracts (3000 shares) the total premium was $3150. The Expiration Date is this Friday, 3 days away. If the stock stays below $112 I keep the premium of $3150 and I keep my stock and if the stock goes above $112, I keep the premium of $3150 and sell my stock with assignment for $112. If the stock goes up a lot, then I’ll have an opportunity lost. I don’t really care which way it goes. Either way I’m making money. The only thing I don’t want to happen is the stock go way down. If that happens, I have to wait for it to come back before I can sell the stock or sell more Calls. This trade is a Covered Call so I put a Risk Factor of 1. Here is the order:
Sell to Open 30 NFLX 1/8/16 $112 C @ $1.05
Watch for the post on Friday or Saturday to see how I do. Will I make money or will I lose Money? If NFLX take a dip I might buy back the Call before Friday if I can grab a nice profit, as I did yesterday.
Pages to read to understand this trade
Covered Calls
Selling Call Options
Opportunity Lost
Option Order Form
Stock/Options Glossary – Assignment
The Options Coach