In 2021 our fearless, intrepid investor lost $65,700 writing (selling) covered calls on Novavax (NVAX). She did in her “fun” portfolio, so while the dollar amount is significant, it is not a significant percentage of her stock market holdings overall.
The risk in writing (selling) derivatives (puts and calls) is entirely connected to the underlying security. Volatility is the standard measure of risk. NVAX is volatile hence it is risky. However, the greater the volatility of the underlying, the greater the potential return.
That is how markets work. The risk/reward thing.
According to Morningstar, NVAX is undervalued at a 51% discount, up by 1% undervaluation of last week. It continues to move in the right direction. Last week, it went from $83 to $89.33, that is, $6.33 per share. Since she owns 1000 shares, she made $6,330 on NVAX last week.
What does she plan to do about writing covered calls on NVAX when the market opens at 9:30AM today?
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