Today was a unique day. I had not initiated any options trades in over a week and for the start of the week, I wanted to try something new. Usually, for income, I sell puts. However, with the market having changed significantly the last few months, betting that a stock will go up (and move away from my strike price), seems less feasible and wise. On the other hand, I do not like selling calls because if I do not own the stock, I would have to buy them back at the higher market price just to sell the stock at the strike price (Buy High, Sell Low). I can explain more later.
Why Rivian Fell In Early Trading
In this volatile time, a lot of unexplainable things happen in the stock market. Today, Rivian dropped 6% for now reason! Nothing changed with the company, there was no breaking news, nothing. My only inference is that Rivian, being an EV startup, is closely correlated with Tesla, who has struggled since its latest earnings update for missing revenue targets (although hitting earnings goals) and showing signs of weak demand in China. Trying to make sense of any opportunity today, based on the following, I believed it made the most sense to buy a call at an at-the-money strike price.
I Called It (Pun Intended) ‼️
Recent history has shown that each day Rivian falls in early trading, it makes up some of those losses with steady climbs back to the higher prices. Today seemed no different to me. So as I observed Rivian fall from $31.8 to $29.4 and begin to turn back upward, I believed I was following an upward trend and bought my call at $1.09. I watched the price of the underlying Rivian stock steadily tick upward and sold when the price neared its earlier day value. The sell price of that same call just an hour and 15 minutes later was $1.52. That was a $.43, or 40% per contract in less than two hours!
Why Am I Excited About This Trade ❓
It was quick. It was high-return. It was low risk. Where else can you get a 40% return? That return on any investment ($100, $1,000, $10,000) is insane! If every trade was this successful, I would be very satisfied with my results. Below is a graphic of the trade and what I believe is great timing on both the buy and the sell. I did notice that holding that call for the rest of the day could have yielded an 80% return, but my #1 goal is risk management and to lock in gains in this crazy, crazy market!
God bless!
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