This is our weekly post dealing with derivatives (calls and puts). Over 80% of our members are interested in the subject.
When the market opens at 9:30 AM today, June 21, Rosi and I plan to sell 18 just out-of-the-money covered call contracts on the 1,800 shares of Novavax (NVAX), which we hold in our “fun” portfolio. (Value about $314,000.00)
Based on the final sale at the closing bell last Friday, June 18, we should get about $6.00 per share, or, $6,000 per contract for a total of $10,800.00 for the week. A bird in the hand, money in the bank! I never netted that much money in one week practising dentistry.
Percentage return for the week? $10,800.00 divided by $314,000.00 and multiplied by 100 equals 4.44%!
We bought the 1,800 shares of Novavax (NVAX)in our “fun” portfolio at an average price of $225.01. Last Friday, July 18, NVAX closed at $174.41. So, we lost $91,467.99. Not much fun.
This year to date, we have made $38,509.81 selling NVAX covered calls in our “fun” portfolio. We sold just out-of-the-money contracts and further out-of-the-money contracts to benefit from any growth if there was any. The $38,509.81 offsets our losses somewhat, but the losses are still significant.
Maybe the title of this post should be: “How to use derivatives as a source of subtracted income.”
But… “To succeed, make more mistakes” is sound advice.
What were our mistakes? What can we learn?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