We sold uncovered puts on Strategy Inc. (MSTR) back in January in anticipation of a rally in bitcoin leading to a rally in MSTR – the largest bitcoin treasury company. We collected $2.12 per share by agreeing to buy MSTR at $150 if it closed below that level just one week after we entered the trade.<\/p>\n
The stock was trading near $160 at the time. It would take a nearly 8% decline in the stock in one week to require us to buy the shares. So, I expected we would simply pocket the $2.12 per share premium and be done with it.<\/p>\n
Of course, when selling uncovered puts, there is always a chance we would have to buy the stock.<\/p>\n
That’s why it’s important to only sell uncovered puts on stocks we want to own and at the strike prices we’re willing to pay.<\/em><\/p>\n The trade went against us from the start. Rather than rallying bitcoin fell – hard. MSTR – the largest owner of bitcoin – fell hard, too. Subscribers were assigned the uncovered put options. We bought MSTR at $150 per share.<\/p>\n Over the past several weeks, though, we’ve been able to generate income by selling covered calls against our shares.<\/p>\n In the meantime, MSTR has rebounded. Last Friday, MSTR closed above the $150 strike price of our most recent covered call position. As a result, our shares got called away at $150 per share – the same price at which we were assigned the stock.<\/p>\n But, because of the premiums we received by selling uncovered puts and covered calls on MSTR, subscribers recorded a profit of $16.62 per share on the trade.<\/p>\n That is nearly eight times the profit expectation<\/em> on the original uncovered put trade.<\/p>\n And, it’s better than an 11% gain in just three months.<\/p>\n Yes… the trade took longer than we expected to play out. But, we were paid well for it.<\/p>\n Selling uncovered puts on stocks you want to own and at prices you want to own them is still the best income-generating strategy in the stock market. It allows you to make money when you’re right.<\/p>\n And, sometimes, you can make even more money when you’re wrong.<\/p>\n Best regards and good trading,<\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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