Turn a Losing Stock into a WINNER with OPTIONS - How I made 28% on a stock that ended 2020 down 12%




Robinhood brokerage account of choice due to zero transaction fee trading options

Process:

- Buy 100 shares

- Our intention is to never lose the shares due to assignment

- Sell calls (weekly duration) at strike price above the current price

- Wait for option to expire

o If worthless, repeat

o If options is not worthless, and it poised to be executed

§ Buy back contract

§ Note down how much you spent to buy contract back

§ Re-sell a new option at a higher strike price, but go out in duration such that you get your money back

· Also called, "roll out and up”, in option lingo

o Overall, objective is to not lose your shares and rolling your strike price up in a transaction you basically break even on

o The thought, after a run up in the strike price, roll up until the stock has a period in which it trades down or stays even. During this time, the option will lose value allowing your strike price to “catch up” to the stock price.

Example: GILD

- Covered the fundamentals of GILD in previous video.

o Like the valuation, dividend, increasing sales with new COVID-19 drug

o Don’t like the debt load