Turn a losing stock position into a winner with Options!
Robinhood brokerage account of choice due to zero transaction fee trading options
- Buy 100 shares
- Our intention is to never lose the shares due to assignment
- Sell calls (weekly duration) at strike price above the current price
- Wait for option to expire
o If worthless, repeat
o If options is not worthless, and it poised to be executed
§ Buy back contract
§ Note down how much you spent to buy contract back
§ Re-sell a new option at a higher strike price, but go out in duration such that you get your money back
· Also called, “roll out and up”, in option lingo
o Overall, objective is to not lose your shares and rolling your strike price up in a transaction you basically break even on
o The thought, after a run up in the strike price, roll up until the stock has a period in which it trades down or stays even. During this time, the option will lose value allowing your strike price to “catch up” to the stock price.
- Covered the fundamentals of GILD in previous video.
o Like the valuation, dividend, increasing sales with new COVID-19 drug
o Don’t like the debt load