What a 1st week! According to CNBC this was the worst week in the market in over 4 years. It’s a rough way to start a new year. You must remember, the markets move with news! Great stocks with great earnings will go down on bad news and bad stocks with bad technicals can go up with good news. I’m talking about geopolitical news. I’m talking about the news on China & North Korea this week. Also news at home like housing reports, employment news, consumer confidence, the list goes on. And the list is long! When picking a stock you cannot only count on the news or technicals of that stock because there can always be some world news to throw a monkey-wrench into your plan. It makes picking the direction of a stock very difficult. For me, it makes the “buy & hold” strategy a think of the past. The way this world is going there is just too much bad news. As always, I speak for myself. With my strategy I do own stocks but I don’t like it! 99% of the time I own stock only to cover my option positions. Or buy stock knowing I’ll be selling Call Options on it soon.
I would like to thank everyone who subscribed to receive my post on email. Please pass “Main Street beats Wall Street” along to anyone who might be into the market and want to learn how to trade options. A bigger audience will make for a better blog. Both my contributing writers and myself will work more enthusiastically when there is a bigger following. When it comes to people reading we had a nice 1st week. We went live on Wednesday and we already had 308 views. Not bad! Let’s review how I did the 1st week of this year. Remember it was a bad week for the market! Also remember all my trades are being posted as I make them. You see me get in and you see me get out. I’m completely transparent!
#1 – On 1/4, I started the week selling a Naked Call on GoPro (GPRO). I sold 20 contracts with the Strike Price of $20 and the Expiration Date of 1/8. I received a premium of $.26. On 20 contracts thats a total of $520 (20 contracts represents 2000 shares). You get $.26 per share. $.26 X 2000 is $520. When I sold the Call GPRO stock was at $18.50. The next day GPRO started moving. As it got close to the Strike Price of $20 I decided to cover my Call and buy 2000 shares or the stock at $19.89. The stock then pulled back and stayed below the $20 Strike Price until expiration and this Friday 1/8 the option expired. Because the stock was below the $20 Strike Price at expiration I keep the stock and I keep the $520 premium. I still own GPRO and I plan to sell another Call on my 2000 shares this Monday.
Profit $520
Pages to read to understand this trade:
What is an Option? (Call)
Covered Call
Selling Call Options
Naked Calls (Coming soon)
#2 – Also on 1/4, I bought 3000 shares of Netflix (NFLX) at $109. On 1/5, I sold 30 contracts of the Covered Calls with the Strike Price $110 and the Expiration Date of 1/8. I received a premium of $1.25. On the 3000 shares the total premium was $3750. The difference between this Call and the above GPRO Call is GPRO started as a Naked Call, then I bought the stock to cover my Call. With NFLX I bought the stock first. This position started as a Covered Call. The same day NFLX took a big dip down to the $104 area which also makes the premium drop. Remember when you sell a Call this is a short position. When you short something, you are selling something before you buy. Please go to the page “Long & Short Positions”, you must understand the concept of selling before buying. When NFLX went to $104 the premium went down to $.85. I decided to buy back the option I sold. I sold for $1.25 and I bought for $.85. That’s a profit of $.40. I sold for $1.25 and brought in $3750 and and bought back for $.85 and spent $2550 for a profit of $1200. I still own the 3000 shares and I keep the $1200. The deal is over in 3 hours.
Profit $1200
Pages to read to understand this trade:
Covered Call
Long & Short Position
#3 – On 1/6, NFLX shot back up to $110. I still owned the 3000 shares so I sold another Covered Call. I sold 30 contracts of the Strike Price of $112 and an Expiration Date of 1/8. With this Call I got a premium of $1.05 On the 3000 shares that’s a total of $3150. On Friday the 8th NFLX was to close below the Strike Price of $112. Because of the way the news around the world had been going I decided to sell my stock right before the close because I didn’t want to hold such a large position over the weekend. I sold the 3000 shares at $111.25. I bought the stock for $109 and sold for $111.25 for a profit of $6750. Also at the close my option expired because the stock was below the Strike Price of $112. Because it expired I keep the premium of $3150. This entire position is closed. Between the Stock gain and the premium on the option the total profit was $6750 + $3150 totaling $9900. This money is in the mattress!
Profit $9900
Pages to read to understand this trade:
Covered Call
#4 – On 1/7 while the other NFLX was still going I bought another 500 shares of NFLX. The stock shot all the way up to $119 a share and I really liked the 1 day premium so I bought 500 shares at $119 and sold 5 contracts of the $120 Strike Price with the 1/8 Expiration Date. I received a premium of $2. On the 500 shares that’s $1000. The stock ended the week below the Strike Price so I keep the $1000 premium and I keep the 500 shares of NFLX. This deal was a 1 day deal for a profit of $1000.
Profit of $1000
Pages to read to understand this trade:
Covered Call
This was the end of the 1st week of the year. It wasn’t a good week for the market but it was a very good week for me. I hope it’s a sign of what kind or year I’ll have. The market is a rocky road! I am sure I’ll hit plenty of potholes and detours but I’ll happy the way the 1st week went.
Total Weekly Profit $12,620
“Money in the Mattress”
Pages to read:
Rate of Return
All of the above trades are in “My Blog” posted as I made them. Take a look! If this doesn’t get your juices flowing continue breaking rocks. I’ll be at my computer. At the end of the week I still own 500 shares of NFLX and 2000 shares of GPRO. Stay tuned this week and see what I do with these stocks and other deals I’ll be making.
Grasshopper, if you don’t understand something don’t get discouraged! We will learn one day at a time, one subject at a time. If you have any questions email me at:
coachsjc@gmail.com
Steve
The Options Coach