We own 50 shares of NUE. We attempted to sell a covered call on Monday and did not get filled. We have decided to go ahead with selling that covered call today. The good news is that we have collected even more premium than our attempt on Monday (0.90 vs 0.75 on Monday). Please be aware, this is 50 shares uncovered so if the stock explodes higher, it creates some risk in the position. The details are as follows:
Sold to open: NUE Nov 15th (monthly) 175.00 strike call
Credit: 0.90 – this order has filled
The Put/Call ratio moved below 0.50 this week. That suggests that essentially nobody wants put options. They don’t want to hedge. They don’t want to speculate. It is a “sentiment” gauge and a contrarian signal. When nobody wants puts, it is usually a pretty good time to look at getting some. So, we have bought a couple of protective positions.
First, we bought calls in the VIX. This will be a very short-term trade.
Buy to open: VIX Nov 20th (monthly) 15.00 strike call
Debit: 3.35 – this order has filled
We have a GTC (good til canceled) stop loss on these calls which will kick us out at a loss if the call values drop further.
Sell to close: VIX Nov 20th (monthly) 15.00 strike call
Stop price: 2.75
GTC – make sure you place the protective stop loss as a GTC order so that it is live every day going forward.
Second, we bought puts in the SPY. This is a bit of a hedge and likely fairly short-term as well.
Buy to open: SPY Dec 20th (monthly) 575.00 strike put
Debit: 15.10 – this order has filled
Max risk = 15.10 or $1,510
This doesn’t have a stop loss but we will monitor the trade. Please be aware the risk of loss is much greater in the SPY trade vs the VIX trade which is a much lower risk. This SPY trade has the potential for at least a few hundred dollars of losses before we exit.