Sunday, May 19, 2013

No Longer Naked

On Friday, May 17, 2013, the naked call I sold on my company stock expired worthless.  So I pocketed a small profit for selling the call.  Normally, I only sell covered calls.   However, I had already sold a covered call when my company stock suddenly advanced significantly.  I decided to take a chance and sell an uncovered (naked) call since I didn't think the stock would go much higher.   Actually, the stock did advance four cents past the strike price before pulling back about 7%.

The risk with a naked call is theoretically unlimited losses if the stock should rise significantly.  I say "theoretically" since no stock I've ever owned has shot up over 70% in a short time.  Still, I was sweating a little this week, since my company stock advanced within 2.5% of the strike price on Wednesday.

However, the price of my company stock stopped advancing after Wednesday and I ended profiting from a the small premium when selling the call.   So even with a couple days of anxiety, the trade worked out as planned.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

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