Tackle Today: When NOT to Sell Covered Calls
June 24, 2021
≈ Eli Lilly be Poppin’ ≈
Traders,
Every once in a while, a stock will come along and smack you upside the head with an important lesson. This month, for me, it was Eli Lilly. The pharmaceutical giant is riding the coattails of positive drug news from Biogen in early June. Look at the BIIB chart to see just how explosive it was.
I’m sorry to say I had June covered calls on LLY ahead of the event. But I wasn’t fully covered! Let’s say I was long 200 shares but only short one call.
June expiration came and went last week. I wrestled my way out of the calls at a smaller loss because of the price pullback that arrived to drop prices back to $217. Did I reload with July covered calls?
NO!
Optimism is sending big buyers into the stock. Now is not the time to cap gains. The extra premium isn’t worth eliminating the chance that I strike it big if LLY has another massive jump. This morning’s 9% ramp is the exact reason why I didn’t sell calls.
So here’s the lesson. When you own a stock that is zipping higher on news or some other catalyst, consider uncovering it.
#TeamTackle
Chart of the Day
Eli Lilly to the Moon
LLY is popping this morning after its Alzheimer’s treatment was called a “breakthrough therapy” by the FDA. Let’s see if the gains stick.
Video of the day
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