Quick Free Update Post On Recent Idea

It didn't take long for that to play out

One of the downsides of writing up a particular stock and strategy is that the market can move quickly.

If you don’t follow up, it seems like you are abandoning your followers. At least that is always how I felt. You shared an idea, the price moved, and now you go radio silent?

Luckily, the big move in the stock 100% supported the strategy I discussed. See post here.

In this post I discussed how I had sold a calls against most of my position in this name as it is 1) volatile, 2) a long-term winner (I think), 3) up 3x from when I purchased it, 4) nearing in on the ‘fair value’ from the person who I saw the name from.

Selling calls is like being ‘short’ the name (the opposite of buying a call). You get paid a premium today. If the price ends up over the strike price of the call, the person who purchased the call from you gets the stock at that price.

So for this name I sold $15, $17.50, and $20 calls near the end of Feb on an up move. I received $69-ish (nice), $125-ish, and $200-ish per call.

Take the $15 call, if this stock went was worth $40 at expiration, I’d have to sell it for $15. If the stock is below $15 at expiration, I just pocket the premium. The risk is you sell the call and the stock goes way up.

But I was more than happy to lighten my position at $15, lighten it even more at $17.50, and take it down very small at $20 per share. So getting paid a nice return while I waited is a win in my opinion.

And if the stock goes down, you have some downside protection since you got paid a premium on the call to offset some of the lowered sale price.

Well the stock dropped since that article and is in the $9 handle today.

I closed out all the sold calls I had at $5-$10 per call. That netted $59-195ish per call I sold of a gain in the 1-2 weeks.

Yes, in hindsight selling at $13 and buying back at $9 would have been more lucrative. But $13 was still off the recent $18 high and there was no reason to think the price would go from $13 to $9 before going from $13 back to $18.

And at $9.xx per share I want to own the stock (and if the $10 puts I sold get assigned in a few weeks, I’ll happily own more - I got paid 3-figures per put on those so my cost basis will be $8.xx on each share if it happens).

I put a LOT of warnings not to just blindly follow people into stock names, so hopefully no one just blindly copy-traded (remember I bought all my shares at $2-7 per share so I was already up big in the name).

But anytime you say “I purchased stock X” there is a chance someone will do it too.

So if any of you purchased the stock and sold $15-$20 calls on it. I thought it was prudent to provide an update. I closed out my short calls. I pocketed a nice little return on them. I am happy to still own shares today (actually picked up some more in just regular buys). If the price rebounds back to $13+, I will be re-selling calls again in the $15-$20 strikes <6 weeks to maturity, hopefully for $69-$200 again.

And finally, do not just copy this trade until you do your own research on it. This is not a recommendation to follow this strategy. It was just a juicy example of option selling that I thought was relevant to some of my prior posts. And clearly this is not a boring stock that you can ignore. Investing is personal and you need to find what works for you which you will never do just jumping from one random idea to the next. And if you do follow this or any stock pick, you are saying you take full responsibility for it.

Good Luck Anon

[Comments disabled on this post. If someone can’t afford <$10 a day, they shouldn’t be trading options and should be earning more money. Feel free to ask any follow-ups on the linked post where the strategy was first written up though.]