In May, I was bearish on micron as we were trading in a sideways action and I thought that the S&P500 would have some form of meaningful selloff and that high volatile stocks would sell off the most. To my surprise, this stock hasn't really done anything in the past few weeks and today, I noticed that stock broke up resistance wedge.
With this wedge breakout, I bought 100 shares at $51.14 and sold a ITM $50 strike call for a credit of $3.60 = $360.
My max profit is my premium ($360) - intrinsic value of the option (51.14-50.00 = 1.14 x100 shares =$114 intrinsic value). Therefore, my max profit is $360-$114 = $246 or 4.8% in a little over a month.
By using the covered call, I am able to protect my investment at the same time as limiting my profits. I do expect this stock to go up more than 4.8%, but I prefer to also limit my losses or increase my probability of profit and that's why I chose a covered call.
Hit the like button if you want to know how this turns out. On a side note, the stock does have earnings on 6/29/2020 or in 25 days and I will most likely either close my position if its deep in the money or I will cover my position even deeper to lock in any gains in the next 25 days.
Goodluck guys.
With this wedge breakout, I bought 100 shares at $51.14 and sold a ITM $50 strike call for a credit of $3.60 = $360.
My max profit is my premium ($360) - intrinsic value of the option (51.14-50.00 = 1.14 x100 shares =$114 intrinsic value). Therefore, my max profit is $360-$114 = $246 or 4.8% in a little over a month.
By using the covered call, I am able to protect my investment at the same time as limiting my profits. I do expect this stock to go up more than 4.8%, but I prefer to also limit my losses or increase my probability of profit and that's why I chose a covered call.
Hit the like button if you want to know how this turns out. On a side note, the stock does have earnings on 6/29/2020 or in 25 days and I will most likely either close my position if its deep in the money or I will cover my position even deeper to lock in any gains in the next 25 days.
Goodluck guys.
