I have mentioned in a few other posts that having an open sold call hedges my position; if the stock price goes down, I get to keep more of the premium. During the recent downturn in my position, I had not fulfilled the 3 month restrictive holding period and the stock went down. Now I don’t want to sell the stock nor sell a call because that would commit me to lock in the loss. OK, it honestly isn’t a “loss”, instead of being ahead by 10% I am now closer to 0%; it’s a wash. But still just as frustrating!
After watching my loss just sit there for months, I finally sold a call which brought in about $130 for commiting to sell at about a 6%+ profit – historically not bad at all based on my records. Actually typing that out in this letter gives me a renewed confidence while my emotions made it feel like a much bigger loss. Get those calculators out people! Do the math!
It really got me thinking about what to do if I am waiting for my shares to be unrestricted, should I hedge my position by buying a put? I historically cried out that this is too risky of a bet, AKA, a “win – lose scenario” (but probably lose). But is there a place for this bet given this short-term turnover system that I have created? My other investments are in it for the long-haul, but for something like an ESPP that I want to turn over 4 times a year I feel like it should be protected from shorter term fluctuations. I am thinking about this more now because it is halfway through the year and I have not sold it once, I am falling behind schedule.
This will be an ongoing experiment. In 2018 I will buy an occasional call when I think it will give me a hedge or dare I say, accelerate my profits. My stock has been at a low for a few months now, and it doesn’t usually go below the current price. I have the sold covered call in place that will either sell the position for me or I keep the premium. I also bought a cheap call that is pretty far out of the money to amplify any gains that the stock makes. If it moves against me, I need to live with that.
I am hesitant to take a risk like buying an option. It costed me $50, cheaper than a meal out with somebody, but I am considering it a learning experience.
I am not a thrill-seeker, I am an experimenter. I welcome your comments, questions, advice, and of course, your criticisms.
Thank you for reading!
–KEN
The Option to Sell 