You might remember, on Monday I sold a Crowdstrike (CRWD) Naked Call. I decided to write about the trade because I think there’s a good lesson to learn.
With CRWD at $171 I sold a 10 contract 12/11/20 $180 Naked Call. I received a premium of $1.35 for $1350. You can read the post here Sold Crowdstrike Calls.
On Wednesday the stock dropped down to the $162 area. With the stock at $163 the premium was at 30¢. I decided to close out the position for the $300 leaving me with a $1050 profit. In the post reporting the “Buy to Close” I mentioned that the stock was at $163 and probably wouldn’t get back up to my $180 Strike Price before Friday. However, I closed the position anyway. You can read the post closing the position here.
As I write I’m sitting around watching the aftermarket shows. CRWD closed at $179.99 and went above $181 in the aftermarket.
There are a couple of lessons here. One is greed, and the other is locking in profit. If I was greedy and didn’t want to spend the $300 to close a Naked position I could have gotten burned. No way did it look like the stock would get back up to $180. Well, it did! Selling Naked Calls can be very dangerous. When you have an opportunity to close out a position with a nice profit, you should. Especially when trading high priced, high volatile, hot stocks. If greed kept me in this position for the extra $300 I could be in a bad situation right now.
Another lesson is to take profit. The readers know I love to lock in profit. Take profit and move on!
If you have any questions about this trade, or any Naked trade, send me an email.
Successful trading,
Steve
The Options Coach