Writing just out-of-the-money covered calls on Novavax (NVAX) every Monday, expiry date on Friday of the same week, our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over the course of about one year.
Mistakes are practice shots if we learn something from them. What did she learn from her NVAX experience?
Instead of writing just out-of-the-money covered calls on any security, she decided to write (sell) covered calls sufficiently out-of-the-money to earn about 1% per month. Safe, decent and guaranteed with a significantly reduced possibility of being assigned!
She likes Intuitive Surgical (ISRG), so she bought 300 shares at $243.7592 per share for a total of $US73,127.76. ISRG will continue to generate premium income even when it declines in the short term. Intelligent investors ignore short-term fluctuations.
Indeed, by the closing bell last Friday, September 2, ISRG dropped to $203.67 per share, giving her a total loss on the security of $120.27 ($243.7592 minus $203.67 times 3). The growth which she was hoping for did not take place last week.
What will she do when the NYSE opens at 9:30 AM tomorrow? (North American stock exchanges are closed today.)YOU NEED TO LOGIN TO VIEW THE REST OF THE CONTENT OR LEAVE A COMMENT. Please Login. Not a Member? You can now sign up for $12 for a one-year membership. Join Us