We have been following the puts and calls record of one of our members who lost $232,407.50 in a $500,000 portfolio when her Novavax (NVAX) shares quickly dropped by over 50%. She paid over $174 each for them in mid-August, having bought them because the premiums on covered calls were attractive.
By selling just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week, she brought her losses from $232,407.50 down to $26,341.25 by November 13!!
Her share were called away a few times. She bought them back at a price higher than the strike price at which they were called away from her because the premiums remain high. Her philosophy, correctly, is that when the returns are high, we do want to have more money invested.
Again, Novavax price dropped and again, she lost money being whipsawed by the market. On Monday, November 16, NVAX shares dropped further, bringing her losses back up to $103,984.05. Going in the wrong direction even though it is an improvement on the original loss of $232,407.50.
Last Monday, December 1, by continuing to write covered calls, she decreased her losses in this NVAX adventure from $103,984.05 by another $16,900.00 bringing them to $87,084.05.
At the close of the market last Friday, December 4, the bid-ask range for just out-of-the-money NVAX calls was $6.20/$6.60.
Based on last Friday’s closing numbers, she should receive $15,360.00 today and decrease her losses to $71,724.45 ($87,084.05 minus $15,360.00).
Will she ever wipe out her losses and begin making money on this adventure?
She plans to stay with this approach. We will keep you posted.
Please note that the Monday Morning program encourages index investing by buying an exchange-traded fund that tracks the S&P 500. Historically, over the long term, this passive investing strategy has been the best way for growing savings and is are likely to remain so for many years.
What you see above is NOT passive investing, however, many of our members are interested so we write about that once in a while.
We have designed the Monday Morning Millionaire Program to offer abstracted investment education. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.
The program does not provide any investment advice or endorsements.
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