New Calls: JOYG
I’m long 100 shares of JOYG from an assigned naked put and also have two JOYG naked puts at the November 40 strike. If all stays even I’ll have 300 shares in a month. With that in mind and JOYG trading down at $34.05, I sold three JOYG October 40 naked calls (JQYJH) for $1.00 and received $287.75 after commissions.
If something changes in the markets and JOYG rallies, I’ll make more on the run up of my 100 long shares and the in the money puts I have than the three naked calls will lose.
My Delta for JOYG is now +141 (at 2pm). That’s still more bullish than I probably should be which accounts for that chance of a rate cut any day this week.
- +100 for the long shares
- +120.40 for the two naked puts
- -1.10 for the October 55 call I started with
- -79.30 for the new calls
I wrote this around 2:00, but hadn’t had a chance to post until after the market closed. JOYG closed up slightly at $37.24. That’s a big recovery from where I got in with these naked calls, so I’ll have to be careful if it recovers much more.
Comment by Mark Wolfinger
It’s very tempting to write naked calls vs. naked puts – based on the assumption that you will be assigned an exercise notice.
My (unhappy) experience doing what you are doing tells me that this is a big-time losing strategy.
To make it much safer, you can consider buying the call that corresponds to the naked put. That cheap option guarantees that you will be long stock when expiration arrives and that your calls are not naked. If this idea is unappealing, it’s rally much less risky to wait until you are assigned to write more calls. Or at least wait until expiration Friday to sell them naked.
Waste of money? Sure, most of the time. But markets do have big reversals on occasion and this insurance is worth the price, IMHO