A company is selling for $6.50 with a ton of open interest calls at $7. There is one day to expiration and it looks like the $7 calls are going to expire worthless. Well around noon, buyers come out of the woods and start bidding up the stock to $6.70. It now closer to the call strike and closer to being exercised. Still nothing to worry about for all those short at the $7 call. Well we keep going and by 1 pm, the shares are trading at $6.90. Now people that are short the call are getting scared, especially if they are short these naked calls. Being short a naked call means you sold someone the right to buy at a certain price even though you don't own the stock. This has the potential for unlimited losses. So to cover any potential losses, the people that are short these naked calls start buying stock on the open market to hedge their positions. If you are going to have to sell at $7 a stock you don't own, you may as well buy it for $6.90 and make some money. So these people start buying and the stock jumps to $7 and now the shorts are scared and they cover and buy on the open market. Next thing you know the stock gets bid up all the way to $7.50 and your looking at a 15.38% move.
Up today $1,337.62 in the Portfolio. DOW up 5.9 points and the S&P 500 up 4.3 points. The day was crazy with the portfolio being up almost $1,000 more than it closed with a couple stocks dropping at the end of the day. One trade today. Bought 100 shares of GE @ $12.4399. This position is down $4 already.
The options that expired on Saturday are still on my book but they are all showing zero for a 100% gain minus commissions because they expired worthless. A total gain of $400.54 including commission costs. Not bad for pretty much only 2 weeks on the book.
Weekly Recap 4/12 - 4/17
Portfolio UP $4,305.65
DOW UP 47.95
S&P 500 UP 13.04
Trades 1
Trades Closed 4
Winners 4
Losers 0
Dividends $31.58
One open trading position
BAC Jan 10 $40 Call (WBAAH) -72.41%
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