My GS position has been anything but good for me so far. As of this afternoon, I’m down over $3,600 on the shares. Since I’ve used options from the beginning of this series of trades, I have reduced my cost per share by $20.36 or $2,036.45 total, including the premiums I received today. Yesterday afternoon I was debating my next steps with GS and decided I could sell a new covered call without buying back my September call since it was so far out of the money. I think the GS September $245 call was trading around $0.11-0.12 when I was considering my options (no pun intended) and I decided that at approximately $14 below my strike, I didn’t have to worry about an assignment in a week and a half and decided to save my $12 that I would’ve spent to close it.
I entered a limit order for the new covered call $0.20 above the ask with the belief that GS would possibly retest its 50 and 100-day moving averages that were close to $233. While GS was trading at $231.61, I sold one GS November $240 covered call for $5.10 and received $508.91 after paying $1.09 in commission.
GS made it as high as $231.98, which means I could’ve earned a little more on the premium, but I still got the high trade of the day, so I’m content with getting more than I would’ve yesterday. I’m also glad I didn’t wait for the September contract to expire because after bouncing at the open, GS was trading below yesterday’s close within 15 minutes of the bell. In the final hour of trading today, GS is hovering around $228.25.
It’s hard to imagine GS was trading over $275 in March. The stock is down 17% from that high and is sitting on potential support on a trend line of higher lows that includes intraday lows from May 31, June 21, August 13, and today. It also ignores the 11 days that it traded below that line in July and August when it bottomed at $219.04, 20.4% below its March high. Of course, I’d like this trend line to hold support again, but won’t be shocked if GS drops to the $219-220 range for a retest of the summer lows.
A retest of the $220 range would be in line with the trend line that goes all the way back to when GS gapped higher in November 2016. The trend line came into play on May 31, 2017 and again on July 2, 2018. At that level, GS seems like it would be a buy again among many investors looking to get in after a 20% decline. I’m curious how the next few days will trade since the past couple of weeks have been brutal after GS rallied to $245.05 and hit resistance at its 200-day moving average.
GS is too expensive for me to buy more at the current price for this account, but I might consider adding some in my IRA if it falls to $220, but not until I see a couple of days without it declining further.