On Monday, November 9, we wrote about a Monday Morning Program member 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 having bought them because the premiums on covered calls were attractive.
To regain her losses, she sold just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week. By last Friday, November 13, she brought her losses from $232,407.50 down to $26,341.25. Something to cheer about!
Her plans to sell more covered calls on NVAX yesterday went askew by the fact that the shares began to drop from $96 per share. By noon, they were trading at $85 per share.
She sold 35 contracts just out-of-the-money (strike price $90, expiry date Friday, November 20, that is, C 20NOV20 90.00) and received $12,250. Using that money, she bought another hundred shares of NVAX, further bringing down her overall per- share costs. She then sold another just out-of-the-money contract and received $350.00 after commissions.
$350 is not much money, but the 3.89% return on investment for the week is exceptional. ($350.00 divided by $90.00 multiplied by 100)You need to login to view the rest of the content. Please Login. Not a Member? You can now sign up for a one-month free trial membership. Join Us