Sold 2 MU Calls to Close

At the open Micron (MU) shot up over $3 so I took advantage of the pop and sold 2 long Calls I bought.

On 1/25/24 I bought 1 MU $90 Call at $8 and on 2/29/24 (yesterday) I bought another $90 Call at $7.70. So I owned 2 MU 6/21/24 $90 Calls at an average price of $7.85.

My goal was to sell these Calls at a price of $10. As the stock was moving up at the open the premium blew through the $10 price. I was watching the stock go up over $3, and we were only 2 minutes into the trading day; plus these positions had an Expiration Date of June 21st. I decided to get a little greedy and place a sell order at $11. Within 2 minutes I was filled. I am out of these positions and this money is going in my mattress. Since I sold these Call options the stock leveled off and is moving horizontally. Let’s see where it goes. If it takes a dip I will probably buy another option.

 

Buy to Open 2 MU 6/21/24 $90.00 C @ $7.85

Sell to Close 2 MU 6/21/24 $90.00 C @ $11.00

Profit +$630

One of these contracts I owned for a month and the other for a day. For both of them I invested $1570 and had a gain of $630. Fantastic! This is a Rate of Return of 40%.

Buying options is a powerful way to make money. You can get the benefit of a stock moving up without investing a large amount of money. When I bought these options the stock was at $89. To buy 200 shares it would cost $17,800. I spent $1570 and controlled 200 shares. When I sold my Calls the stock was at $94.20. If I bought the stock I would have made $5.20 for a total of $1040 on the 200 shares. This would be a return of 5.8% on my $17,800 investment. I made 40% while only investing $1570.

When you invest in a stock you have to figure out which is better for you, your wallet and your risk tolerance. As we know buying options can be very risky. If you go with options make sure you understand Time Value and Time Decay. I like to buy more Time Value which moves my Expiration Date out a few months. If you buy the shorter term option it will be a lot less expensive, in fact cheap, however, the risk is great. One fact you must know is that 80% of options bought expire worthless. This happens because new traders buy the shorter term options because of their low cost, let’s say an Expiration Date 2 weeks out. If the stock immediately moves down they are in trouble. Now the stock has to recover while Time Decay is eating away at your premium as the days go by. A lot of new options traders don’t take into consideration the cost of the option. By this I mean if you invest $4 for an option with the stock at $50 and the stock moves down a few dollars, the stock has to recover and go $4 above you Strike Price of $50. If your stock moved down and only recovered back to the $50 on Expiration Day that option will expire worthless. Yes you have the right to buy the stock at $50 but your $4 investment is gone. If you bought only 1 contract you invested $400.

This is so important to understand. If you are in awe of my quick $630 profit and want to buy options please do your homework. Please understand how they work or you will lose your money. And send me emails until you understand everything about buying options. I am here for Main Street beats Wall Street members.

 

Successful trading,

Steve

The Options Coach