Discover more from Covered Calls with Reinis Fischer
Buying LEAP Call Option with Virgin Galactic SPCE stock to protect from losses and profit in future
As I was mentioning in my YouTube video, today I bought a LEAP call option on SPCE stock to protect my account from future losses.
Let me explain - I’ve been buying SPCE stock for the past couple of months, currently holding 215 shares.
Average stock buys price $24.64.
Also, I have been selling covered call options and to spice it up I was selling some naked call options.
In total 5 call options contracts with different strike prices and different expires. .2 covered and 3 naked call options
With the recent steep price incline above $35 per share, those uncovered call options started to suffer a lot and affected the total portfolio.
I did a few roll-ups, managed to increase strike prices from $22 to $26, but still feeling worried about those 3 uncovered call positions, decided to buy a long expiry SPCE call option.
here is my trade setup:
BOT 1 SPCE JAN 20 '23 20 Call Option 23.30 USD
I paid $2,330 to buy January 20, 2023, SPCE call option with a strike price of $20. Alternatively, I could buy 100 shares with SPCE paying $3,700… so I’m saving some money here already, but I have to be careful and not let this contract expire.
Anyhow this contract is more than 2 years long and I can now control 100 shares with SPCE. I’m very confident I will get out of this trade quite earlier, but you never know.
What happens next?
I now have 3 covered call contracts out of 5.
If SPCE keeps increasing in price, my losses are stopped here for at least one contract. Two to go. If SPCE decreases in price, I will have a chance to take advantage and close the losing two calls.
Might sound complicated, I agree
by the way, here is the video, I talk about these things