Week 51 - Dec 20 Investment moves

Week 51 - Dec 20 Investment moves

• Today US markets as of 11:00 am (EST)
• Dec 20 Investment Moves
• Explaining the GILD trade.

Today US markets as of 11:00 am (EST)

Dec 20 Investment Moves

Here are today's trades as of 11:00 am (EST)

Summary:

• GILD Put credit spread rolled out several months for $61 credit.
• GILD Covered call rolled up and out for $38 Debit each (cash out of pocket today).
• SOFI covered call rolled up and out for $19 credit.
• BMY covered call rolled up and out for $19 debit.
• BMY put credit spread rolled down and out for $33 each.
• LFUS covered call rolled down for $72.
• MRVL put credit spread rolled down and out for $23 each.
• V put credit spread rolled down and out for $66 each
• V put credit spread rolled down and out for $45 each

Explaining the GILD trade.

Why do roll-covered calls? Most people will never buy an ITM-covered call, but rather an OTM (out of the money) covered call. Then a covered call is later ITM (in-the-money), that means the made money on the HOLDING the stock PLUS the premium they got from writing the Covered call in the first place.

Many of the web call this a win, say that is what a covered call should do, and be happy with the small profit.

Let's do some math today with my TRADE:

• GILD Put credit spread rolled out several months for $61 credit.
• GILD Covered call rolled up and out for $38 Debit each (cash out of pocket

GILD is trading at over $90 a share on DEC 20.

The stock has moved up over 40% in the last 6 months. This is why most covered calls will go from OTM to ITM. This is not the normal "expected move" and hence we are in this situation today.

My covered call is at $77.50 strike price (or about $15 under the current market price). I will spend $38 today to move my STRIKE price from $77.50 to $80 (a gain of $2.50 for each option). If you minus the cost of $40 (fees included), I can potentially make over $200 in value for spending that $40 today for every 100 shares I have.

For me to use a PUT credit spread to help offset the cost of rolling a covered call, I want to MAKE sure that the STRIKE price of the PUT is ALWAYS under the covered call (to reduce the risk of both trades).

I collected $61 for the PUT credit spread using a $75 strike price.
I paid $80 for the covered call using a $80 strike price.

Have a profitable day!