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.
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