Today, we report on yesterday’s covered call activity by our intrepid investor 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.
By November 13, she brought her losses from $232,407.50 down to $26,341.25 by selling just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week.
On Monday, November 16, NVAX shares dropped further, from $96 per share to $85 per share, bringing her losses back up t0 $103,984.05.
She plans to continue selling just out-of-the-money covered calls on NVAX every Monday with expiry date on Friday of the same week.
She sees her NVAX shares as a money tree. Regardless of the value of the money tree at any time, it is throwing off cash on an ongoing basis.
Yesterday, she sold 33 covered call contract on NVAX at just out-of-the-money strike price $89.00 expiry date this coming Friday, November 27 (C 27NOV20 89.00) and got $10,675 in premium income, bringing her loss to $93,309.05. ($103,984.05 minus $10,675.)
The Monday morning program encourages passive investing by buying an exchange-traded fund that tracks the S&P 500. (SPY Is an excellent example.) Known as index investing, historically, over the long term, it has been most investors’ best way for growing savings and is are likely to remain so for many years.
However, many of our members are interested in puts and calls so we write about that once in a while.
Our intrepid investor is considering writing just out-of-the-money covered calls on Sorrento Therapeutics Inc. (SRNE).
The percentage return on the premiums is higher than on NVAX and Morningstar rates the stock price as undervalued at a 28% discount.
The Sunday Morning Program discourages stock picking, but occasionally, with luck, it can outperform. (Habit number three is to buy the American economy as a whole by acquiring an exchange-traded fund that tracks the S&P 500. No stock picking!)
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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