Alan answers a question posed by Kevin, who asks:
Most of my trades have been winning ones but I had one go south. I would like to learn from this trade so I’m hoping you can help me learn how to handle it tactically and emotionally. Here it is:
12/20/17: Buy 200 x GRUB at $73.00
12/20/17: Sold 1x ITM $72.50 call at $2.90
12/20/17: Sold 1x ITM $70.00 call at $4.25
Stock hovers between $71.00 – $74.00 for the first 3 weeks of the contract
1/8/18: Starts 3 days of 3 – 4% price declines with no apparent negative news
1/10/18: 10% guideline is reached and shares were sold at $67.70
Did I select the wrong stock to begin with?
Did I misinterpret the technical signals?
Should I have rolled down instead of selling the stock?
How would you have approached this situation?
It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#145, “Evaluating a Losing Covered Call Trade ”
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