Micron Technology (MU)

[JLS]

Rolling MU Options

That’s what I’ve had to do a lot of lately to adjust to a stronger than expected MU stock trade and to profitably continue to be able to sell Calls against those shares (to create additional income beyond share price appreciation). The ideal goal is to be able to hold the shares long term and continue to sell Calls against them for additional income and not have the shares assigned.

What’s wrong with having the shares assigned? If they are, and you want back in the stock, when trading a strong stock you’ll likely have to buy the shares back at a higher price which means you likely lag behind on the overall trade for that case. Said differently, the income from selling the Calls didn’t compensate for having to repurchase the stock at a higher price, so your time and effort was wasted, and there’s a loss for that effort and time -- you would have been farther ahead if you just held the stock and didn’t get fancy with Covered Calls.

Looking at the two images below, there are two inclining forks. There is a short one, created recently to account for the increased strength of MU trade, and a much longer one that is anchored in May of 2016. After the last earnings release MU gapped up on the next day and in a few days rested above the initial long-term fork. Expecting MU to return below the upper tine, I sold Calls. It didn’t do as expected so I drew a fourth tine and repositioned my Calls - - rolled them out and up. Strength continued (which I didn’t expect) so a few days later I rolled the Calls out again. Then it wanted a fifth tine -- holy cow! So I rolled options out again and again. Finally learned that I should link two forks and expect that MU is more likely to trade within the upper fork, and I should choose my options accordingly, and I should use closer expirations. As a matter fact, two days ago MU dropped and tested the middle tine of the upper fork then continued up yesterday and today, thus staying in the upper section of the upper fork.

Current Call options have a strike of $45.50 and expire this Friday. I’m pretty sure I won’t have to roll them out. Now if MU remains within the forks drawn, it should be relatively easy to sell Covered Calls and regain the accumulation of small losses of the previously rolled Calls.

Note: the solid, dashed, and dotted blue lines going off the right side of the chart aid me in keeping track of future weekly trends and options expiration.

Rolling options: https://www.tastytrade.com/tt/learn/rolling