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Motley Fool Pro / Pro: Catch-Up Trades


Subject:  COO worked out not so great Date:  8/13/2018  3:37 PM
Author:  zoeyves Number:  818 of 829

Hey Fools

COO worked out poorly for me. I got in at 237.29 after which COO tanked. I sold $230 calls for 8.61 (which given my purchase price maybe I should not have - thoughts?) Then, and only then COO started its ascend. Ah well. A total of $1.32 in profit (bar possible costs for the execution of the call) – 0.5% in profits! Not exactly what I call North Star beating performance here.

So why this whole ordeal? Do we no longer believe in our thesis, which sounded good when it was written? Why let the shared be called away? Can anybody explain the rationale behind this whole trade? Frankly, why was there a recommendation to cover COO when our thesis was that it should perform really well? (and why did I follow it - only I can answer). I thought that we only do covered calls if and when we are ready to let shares go, which for me in this case wasn't really the case, or did I miss an update to the investment thesis?

My main question is: when does it make sense to write covered calls that if executed effectively lock in a loss (or, in this case, basically a wash)? And this is no hypothetical question for me, as I have yet to executed covers calls on JnJ which would result in a major loss if executed (which is why I haven't, so far, written any).

Any feedback welcome!
- Zy
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