Got an email question today about a potential trade. Actually the email says he already made the trade. Let’s take a look and see if it makes sense.
“I’m looking at one of the companies Xpound has covered: AKS.
If I bought 100 shares of this company at $3.35 and I sold 1 July 20 Call at $3.00 for .44 credit, how would this trade play out if I was assigned? Is there an issue with the $3.35 and $3.00 difference?
Thanks for your help.”
Ok, so this is a covered call on a very low dollar stock. Alarm bells are already going off in my head. I do not like low dollar stocks because they can be very volatile.
Looking at the chart I see that earnings is coming up on 7/23 which is after expiration. These July options expire on the 19th. So that is ok.
Stock seems to be moving sideways which is [...]