snoot,
You're too generous in calling your options trade a long shot. It was an impossible shot. CLF had already made a 4-month high, and you assumed it was going to shoot very significantly higher in less than two weeks while the time value of your options is burning off.
You also bought CLF approximately 6 weeks earlier (than I bought mine), at only a slightly lower price but with the attitude it was at a bottom and would shoot significantly higher. I assume you still own it. Furthermore, since you haven't sold any Calls on it, you are making no active progress directed toward either getting your money back or making income from it. That's pretty foolish, don't you think?
Yes I did buy CLF, but not with the idea that it would go any significant amount higher. I bought it for the purpose of showing you how to trade it, and make money doing it. I decided to do it and give you the opportunity to learn something at the same time.
As I bought CLF, I knew it wasn't going higher (while you thought it was headed for $35 within two weeks) so I immediately sold the January 27.50 calls and brought in $1.17. Those expired worthless to the buyer on Jan 31.
Right away you should see a difference in my approach as compared to yours. Your approach is to throw a Hail Mary pass to a destination totally out of range. My approach is to recognize a significant risk and immediately reduce it. Your approach is to sit on your hands and wait. My approach pays a hefty monthly dividend through the process of selling Calls. Sometimes I refer to it as the pay-your-own-dividend method of investing.
The way I treat my trade is that while I am saving money in the CLF account, I should be receiving good dividends while I wait.
Your approach is to put your money in a CLF account that pays nothing.
After my fist sale of Calls expired I didn't immediately sell more calls because CLF had made a bullish reversal hammer candle a few days earlier, and broke higher the next day but proceeded to retest the low during the following days. My opinion at the time was that a double bottom would form, so I should wait for a rally off that bottom before selling new Calls.
Meanwhile, you were still doing nothing about your CLF shares.
The double bottom did form and CLF rallied to the high of 23.53 on February 14. That day was a Pythia doji day, but so was the previous day. So I could wait another day for confirmation of a top or continuation. But I decided not to wait because of the two sequential dojis and also the fact that my SR density chart showed significant overhead resistance at 24 as well as at 25, and the rally was also quite substantial off the bottom of several days earlier.
Therefore, on the 14th, I sold for $0.68 the March 22, $25 Calls. Now my total income from the Calls is $1.85. Your income for holding CLF shares is $0.
Even though your entry price may have been a dollar less than mine, by the time you get to break-even, I will have a significant profit while you are still at zero profit. And the longer it takes, the larger the difference will be between my position and yours.
Think about it. You might learn something about investing.
My way is investing. Your way is gambling.
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