Hello Investors,
Today in class we discussed existing positions, covered calls, trading profits and made a few more changes to the portfolio as follows:
Sold a covered call in SNOW against the rest of our shares.
Sell to open: SNOW Jan 19th (monthly) 210.00 strike call
Credit: 2.05Â – this order has filled
Canceled the idea of selling covered calls in December and selling all covered calls in January for GOLD if we can get filled:
Sell to open: GOLD Jan 19th (monthly) 19.00 strike call
Credit: 0.09Â – this order is still pending
Attempting to sell a covered call on TMUS if we can get filled:
Sell to open: TMUS Jan 19th (monthly) 165.00 strike call
Credit: 0.40Â – this order is still pending
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Attempting to sell a covered call on WBA if we can get filled:
Sell to open: WBA Jan 19th (monthly) 25.00 strike call
Credit: 0.39Â – this order is still pending
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Bought a 1×2 call spread in NEM. This leaves our short Dec 45 covered call “naked” for a couple of weeks.
Buy to open: NEM Jan 19th (monthly) 37.50 strike call (ratio of 1)
Sell to open: NEM Jan 19th (monthly) 42.50 strike call (ratio of 2)
Debit: 0.72Â – this order has filled
Max risk = 0.72 or $72.00 per spread
Max reward = 4.28 or $428.00 per spread
Bought a 4 legged combo trade to hedge our DKNG covered calls.
Buy to open: DKNG Jan 19th (monthly) 38.00 strike call (ratio of 1)
Sell to open: DKNG Jan 19th (monthly) 43.00 strike call (ratio of 1)
Sell to open: DKNG Jan 19th (monthly) 38.00 strike put (ratio of 1)
Buy to open: DKNG Jan 19th (monthly) 35.00 strike put (ratio of 1)
Debit: 0.78Â – this order has filled
Max risk = 3.78 or $378.00 per spread
Max reward = 4.22 or $422.00 per spread
We have ITM covered calls in DKNG and this trade is a hedge against those positions. The way the DKNG trade works is as follows. We promise to buy 100 shares at 38/share (short put) and bought a 35 strike put for protection. Max risk happens if the stock is below 35/share at Jan 19th expiration. We bought the rights to own another 100 shares at 38/share (long call) and sold a promise against it at the 43 strike call for income. Max reward happens if the stock is above 43/share at Jan 19th expiration. The ideal scenario is the stock dropping at/below 35/share through December expiration, then rebounding to recover above 43/share through January expiration.
Have a great Thanksgiving week!