Follow up to how we are managing our current position in LYFT. Since this accidentally went out to all members I will post updates for everyone. In any event you get an idea of how we manage aggressive trades, in volatile stocks.
Also I do have a Bitcoin article going out shortly.
Our initial position was entered below 58.00 and we sold half of that at 59.45 or thereabouts, locking in something as the market is in a position to pullback. This is a remove risk when you can area of the market, and trades should be limited to short term. One of the startegies we use for locking in profits and reducing risk is selling covered calls.
Now if you do not have 100 shares of LYFT this is NOT a strategy to use. But for those that are capable of trading 100-200 shares options offer a wonderful strategy for reducing risk.
With LYFT back to the 59.50 level, we are looking at selling a covered call for expiration May 10th at the 59.50 Strike for 3.30-3.50 or more. The market opened to the downside and has pared back some of the losses so we could see an attempt to buy the market here. Regardless we are going to sell a covered call at these premiums. Currently 3.400 should fill as the bid is 3.30 and the ask is 3.50. For those that are more experienced and want to monitor the trade and see if the market attempts to pare losses receiving more for your premium this is up to you.
- This reduces our risk by 3.50 a share if you have 100 shares.
- We are being paid now to lock in profits, but this caps the the profits we can make at 63.00.
In a market like this we are going to reduce risk, and cap our profit potential. IF the market falls apart and stops us out, (foregoing slippage) we still made some money on this trade.
We are going to wait to sell the covered calls closer to the end of trading and see if buyers attempt to buy the dip.
REMEMBER: IF YOU DO NOT HAVE 100 SHARES DO NOT USE THIS STRATEGY. SELL 1 CONTRACT PER EACH 100 SHARE LOT. WE HAVE 200 SHARES SO WE ARE GOING TO SELL 2 CONTRACTS.
This went out to everyone including free subscribers so I will post the updates for everyone as well.
If you own the stock outright there is nothing to do unless you want to lock in some more profits.This is a Free Member article. To receive email notifications when new articles are available, click here.