Okay, okay, okay, there's a lot of risk in this trade (if you do any due diligence on the company, you'll see why; it could easily continue into the sub $1 crapper from here). By the same token, the IV is currently at 200+% which is probably why a covered call at this price is so doable. The credit for the $4 short call is, after all, .57 at the mid ($57), and you virtually never get that out of an underlying that is priced at this level.
Since there is a risk that it will continue lower, the only sensible thing is to go small, so here's my setup:
SUNE Covered Call Buy 100 Shares at 3.31 Sell 1 contract Jan 15 4 call
I will look for a fill for both the shares and short call as a package for a 2.78 debit ($278).
If the price is below the short call at expiration, I will keep the credit for that (currently .57 or $57 at the mid) and reduce my cost basis in the underlying stock by $57 (not counting fees/commissions) from $331 to $274. I will then proceed to lather, rinse, repeat with the short calls, further reducing my cost basis in the 100 shares I own.
Naturally, if price is greater than $4 at expiration, my 100 shares will be called away for $4, and I will earn the $400 - the cost basis or $274 = $126 (excluding fees and costs), which would not be bad for such a small fry play.
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As with my X covered call, I'm thinking that I might want to stick with this slightly longer, since price almost immediately broke $4, my Jan 15 short call strike, so today I rolled the short call to the April 15th 4.5 and got filled for a .41 credit, further reducing my cost basis in the stock to $215 ... . Price is now at $4.39, but I'm going to calm down a little bit, see if any upmove has legs, and then go from there ... . I naturally don't want to be a "price chaser," but the thing has quite a bit of potential upside, so it might be worthwhile to stick with it for longer than usual.
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I'm going to kind of do a "Are you kidding me?!" thing here. Price has now broken my rolled 4.5 short call strike, and the entire setup is in profit. I can do a number of things here, including closing out the whole thing now, chase price up the ladder by rolling that 4.5 short call out again (I'd have to roll it up and out past April to do that for an additional credit), or wait and see what happens. I'm going to wait; the setup was intended to be short term, but if it's going to shoot up past 5 and beyond, might as well hang in there.
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Just checked ... . If I roll to 5, July expiry, I'll only get a .15 credit, so it isn't worth it to roll right now.
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I'm going to take the money and run here ... . There's not much I can do with that April 15 4.5 short call, and I made out a little better than initially anticipated ... .
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Covered for a 3.84 credit, so I opened the trade for a 2.78 debit, rolled the short call to the April 15 4.5 for an additional .41 credit, further reducing my cost basis to $215, so my total profit was $384 minus my cost basis of $215 or about $169 (excluding fees and commissions). Not bad for such a small stock and for such a short period of time.
Unfortunately, I got wayyyy too frisky with my short call, thinking that I would merely look for "a small bounce" and then get out. I will look at putting the setup on again with a bit more breathing room for the short call ... .
NaughtyPines
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I'm not sure that I want to abandon this trade so soon ... . Price has quickly broken $4, so I'm going to try to roll my current Jan 15th 4 short call out to the Apr 15 4.5 for an additional .50 credit, further reducing my cost basis in the stock. That's wayyy longer than I ordinarily like to hold positions, but for the small amount of buying power being devoted to the play, I'm more than willing to hold on to it for a bit longer than usual.
NaughtyPines
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Filled for a 2.78 debit/contract ... .
timwest
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I'll join you on this one.
NaughtyPines
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Fingers crossed. I'm going quite small in the scheme of things, so that I won't be crying a lot in my spilled milk if it goes sour ... .