Our fearless, intrepid investor was on holiday yesterday, so she did not post anything about her derivatives experience.
Writing just out-of-the-money covered calls on Novavax (NVAX) every Monday, expiry date on Friday of the same week, she 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.
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 also decided to write (sell) covered calls on a security that she would like to own long-term. After discussing the issue with knowledgable investors, she decided that she likes Intuitive Surgical (ISRG) and she bought 300 shares for a total of $US73,119.00. ISRG will continue to generate premium income even when it declines in the short term. Intelligent investors ignore short-term fluctuations.
Indeed, ISRG dropped by an extent greater than the premium income – a short-term loss. Morningstar quants and analysts both recommend ISRG as a buy over the long term. So yes, she earned her one percent a month premium income while waiting for ISRG to rise in price.
What did she do yesterday when the market opened at 9:30 AM?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