You might recall that 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.
According to Morningstar, NVAX remains undervalued at a 50% discount. During the week, it went from $70 to $83 a share. Since she owns 1000 shares, she made $13,000 on NVAX last week. (For an overview of NVAX, visit last Tuesday’s post.) Where we are is not nearly as important as the direction in which we are moving. NVAX is moving in the right direction!
She expects the price to keep rising. For her not to be assigned, she plans to continue holding the stock and waiting for it to rise in price before she starts writing covered calls on it again. This is an example of market timing which is not a good idea. Done in a “fun” portfolio, it’s acceptable.
One of the few ways to outperform the market is to ignore one or more of the six habits. However, that approach works only occasionally. We recommend it for “fun” portfolios only. Most of the time, they are not much fun.
Next Monday, February 7, we will report how her tactic worked out and her plans for that week.
Remember what you see below.
Resulting from its involvement in derivatives, in 1994, California’s Orange County declared bankruptcy.
Resulting from its involvement in derivatives, in 1998, Long Term Capital Management needed a $3.6 billion bailout from 14 financial institutions to prevent market panic and collapse of the entire financial system.
Gambling with derivatives, many individual investors keep losing 100% of their money.
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