I’ve been watching Lexinfintech (LX) for a long time. A actually still own shares which were in one of my Wealth Builder portfolios. I took “Wealth Builder” down during the COVID drop. I continue to work on bringing it back soon.
A few minutes ago I made a trade with LX that I feel will be a great example of a Grasshopper trade. I bought 500 shares at $6.95 and sold a 5 contract Call. LX does not have weekly options but I still like the stock. The stock has options expiring today so I went out to the next expiration Date which is Feb 19th.
I sold 5 contracts of the 2/19/21 $7.50 Calls for a premium of 50¢ for $250.
Buy 500 Shares LX @ $6.95
Sell to Open 5 2/19/21 $7.50 C @ 50¢ (+$250)
I’m not crazy about selling a 1 month Call but I like this stock at this price. For a Grasshopper who has a smaller account I feel this type of Covered Call is a great opportunity to bring is a nice return. Remember, it’s all about the Return on Investment (ROI).
When I put this stock into my “Wealth Builder” it was at a higher price. When entering this stock into one of my portfolios I wrote a report. You can read it here, Lexinfintech Report.
This stock at this price is a low risk Covered Call. The trade gets a Risk Factor 1.
The 50¢ premium on a $6.95 stock is a ROI of 7.2% return. For a premium only this is a nice return for a 1 month investment. If I get assigned I’ll make another 55¢ on the stock sale. If assigned the return will be 1.05 for a 15.1% ROI.
Successful trading,
Steve
The Options Coach