Hain Celestial Group, Inc (HAIN) bounced strongly off its recent lows. I’ve sold calls on it in the past and have reduced my cost considerably. In the middle of this most recent surge I bought back my calls sold at a 25 expiry and now that I see HAIN slowing down with a somewhat limited upside again I’ve sold two more covered calls in my IRA on my 200 shares of HAIN. While at 29.90, my order to sell two September 30 calls (QQHIF) hit and I received $348.50. I was planning to wait until the October options were listed, but saw a good oportunity today to sell before HAIN came back down.
HAIN is an interesting play for options to me. Implied volatility is at 44.15 for the one month out at-the-money calls. As of 10:12 am today I’m the only one to have sold calls at that strike. The open interest is only 204 contracts. Why is that interesting? Sound boring? It’s interesting to me because I like the stock for the long term so I feel comfortable holding on to it and with such high volatility on such a thinly traded option I can leave a seemingly mis-priced limit order out there and its more likely that it’ll hit by someone who isn’t a professional trader and is getting nervous about their chances for gains or losses (if I’m selling puts). With the spreads so big between the bid/ask that someone like me who can sit and wait has the opportunity to catch a “rookie” off guard and pocket their money. I know it happened to me on the other side years ago when I was first starting to invest with options. On a couple of occasions I hit buy instead of sell or hit market instead of limit and got smacked with a stupid trade. On the other hand, when trading thinly traded options, it’s easy to get caught on the other side if the equity moves against you and you want to get out in a hurry you are likely to over pay.
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