Bought back NVDA Call Options

Wow the market sure tanked today didn't it? It went down 4% today. It was all over the radio on the way home. I had briefly checked my trading account at about 2:00 PM eastern time, and noticed that my limit order for NVDA had been filled. That brings my account up after 7 days, and 2 trades from $50,000 to $52,400. That's a gain of 4.8% in 7 days. It's funny. The gains are in virtual money so basically it doesn't matter. I mean, I could go out and buy 2400 virtual double cheeseburgers at Mac Donalds with those virtual gains. Now I've got to figure out what trades to get into next. No big deal, and no hurry.

Just to review. The trade I made today was actually the second leg of a trade I entered into 7 days ago. Last Wednesday I sold 15 contracts of NVDA June 35 call options. That means I took upon myself the obligation that if the stock went over $35 by the third week in June, I would have to sell the option buyer 1500 shares of NVDA stock at $35 per share. At the time I placed the trade NVDA was selling for $33 per share. It was making a series of lower highs and lower lows, so it was trending down, and it seemed to be at resistance. I was paid $2.40 per share for the options (or $3600) and I put in a buy order for $1.70 (or $2550). If the price continued on the down trend, the option would continue to go down in price (which is what I thought would happen), and if time passed and the price remained the same, I knew the option price would decay as time passed. Today when the market tanked, the NVDA options dipped down as low as 1.65.

In the future, I'm not going to sell naked call options. That was a stupid thing to do. My technical analysis was correct, and the stock did what I expected it to do, but naked call options are never a good idea. I don't know what crazy gene invaded my body, but in the future I will cover my short call option positions with a deep in the money option, or with actual stock. Or I'll sell naked puts (which is the same risk profile of doing covered calls).

Even better than my virtual trading account flourishing, was my friend Kenny calling me up on the phone. So I want to briefly channel Jim Cramer and shout out to Kenny "Boo Yah!"