I HAVE 5000 Shares of MICRON! NOW WHAT!

TJ The Wheel Deal · 7m · transcribed 2h ago

Section Insights

# 0:00

Micron Position Overview

What is the current status of the Micron position?

The speaker holds 5,000 shares of Micron at a cost of $1,044 per share, with the current price at $854, resulting in a significant unrealized loss. They are utilizing covered calls and naked calls to manage this position.

Current loss on Micron shares is approximately $1 million.
Covered calls are being used to generate income while holding the shares.
Naked calls are employed as a risk management strategy.

# 1:27

Risk Management Strategy

How is the speaker managing the risk associated with their Micron position?

The speaker has implemented a strategy involving covered calls and short puts to mitigate potential losses and generate income. They anticipate that if Micron's price drops significantly, it could lead to substantial additional losses.

For every $100 drop in Micron's price, the loss could increase by $500,000.
Short puts are used to earn additional income as long as Micron stays above $350.
The strategy is to continue trading until a profitable exit can be achieved.

# 2:55

Ideal Market Conditions

What are the ideal market conditions for the speaker's Micron strategy?

The speaker hopes for Micron's price to stabilize or gradually increase, allowing them to execute multiple cycles of covered and naked calls without significant losses.

Stability in Micron's price around $800 to $900 is preferred.
If the price rises significantly, adjustments to the call strategy will be necessary.
The goal is to avoid selling shares at a loss and to maximize premium collection.

# 4:23

Long-Term Strategy and Flexibility

What is the long-term strategy for managing the Micron position?

The speaker plans to continue rolling options and potentially acquire more shares if conditions allow. They emphasize the importance of flexibility in their strategy to adapt to market changes.

Shares do not expire, providing a long-term holding option.
The speaker aims to manage risk while looking for profitable opportunities.
Rolling options can provide ongoing income and potential for profit.

# 5:51

Overall Market Outlook

What is the speaker's outlook on Micron and their trading strategy?

The speaker believes that Micron's price will stabilize above $350, with a potential baseline around $500 to $700. They plan to continue their trading strategy to generate consistent income over time.

The speaker expects to generate significant income from the Micron position over the long term.
They are cautious but optimistic about Micron's future performance.
Past experiences with new positions have often started poorly, but the speaker is prepared to adapt.

Transcript

0:00 TJ the Wheel Joe coming at you. Let's talk about the Micron position. What do we got? We have 5,000 shares at 1,044. And the current share price is 854. So, roughly $200 to the no bueno on 5,000 shares. That's going to be about a million bucks to the no bueno. So, what are we doing? Are we just sitting on the shares hoping and praying that they recover? Not really. We've got 50 covered calls at a 1,050 strike expiring on 6/18 with an extrinsic value of $81,000.

0:39 So, basically if Micron stays below 1,050 for the next few you know, until the Friday after next, we pocket the 81,000. If it goes above 1,050, we have a decision to make. We could either deliver the shares cuz they are covered or we can roll it to another cycle and try to capture some more upside. But, we're also taking a risk. We an insurance policy if you will, selling 150 naked calls at 1,100. The reason they're naked is cuz we don't own the shares. In order to own those shares, that would be an additional 15,000 shares and that's just not realistic. And those expire on 6/26 and we have $406,000 in extrinsic value. So, why would I do that? It is simply to protect against a further drawdown. That thing goes to 754, it's going to cost us another half a million dollars. It goes to 654, it's going to cost another million dollars.

1:40 It's 500,000 for every $100 drawdown. The same goes for the inverse, right? $500,000 gain for every 100 points to the upside. And then we've got the sleep easy at night play. We've got 500 short puts at 350 for 1218. So, Micron just has to stay above 350 and we pocket an additional 818,000. So, if you add all of those up, it's roughly 1. 305 mil, which is more than the money that we're down on the current shares. So, what's the plan?

2:21 To rinse and repeat till I can deliver the shares at a profit. Cuz this is a trade. This is not an investment. I haven't done enough homework to categorize it as an investment. I'll see if I can form a legitimate investment thesis after the next earnings call. and one that's not just so generic as oh, they're sold out for the next year possibly two and they've got some long-term contracts. I got to really sink my teeth into this thing to see what's what.

2:51 So, what is the ideal scenario? MU levels off, transpire gradually, and we're able to run several cycles of these covered calls {slash} naked calls. That is the ideal scenario. Doesn't even have to go up in value much. 854 is okay. 800 is okay. 700 causes a lot more pain. That's ideal. If it rips higher though, it takes off, I have to take off the naked calls and consider rolling up the covered calls so I could capture some more upside.

3:30 But if it tanks more, then I've got to sell naked calls and covered calls at 1050 to maximize premiums. Cuz over here I'm at 1050. So, that's the lowest I can go because where I went to school, you don't want to buy something for a thousand 44 and sell it for like 944, right? You want to to it for at least 1050 so you can make that $6 in capital appreciation on 5,000 shares. It's not a whole lot, right?

3:57 It's not a whole lot, but it's better than selling them for a loss. So, on these $1,100 calls on the next round, these would be at 1,050. And I would just do that over and over and over again and take what the market gives me. Now, let's say this thing tanked to like 600, and now there's just not a lot of premiums at 1,050. That's when I would have to make a very difficult decision. One, I could just continue to bag hold. The good news is shares don't expire. Options do, but the shares do not. They're bought and paid for.

4:31 And they're not susceptible to volatility. So, that's the good news, right? On the shares. The bad news is it's a 100 delta. So, you know, every dollar is 5,000 bucks, right? It's 5,000 shares. So, there's that. So, again, the ideal scenario is for Micron to level off. And And even better scenario is it for is is it for it to go up pretty steady. Go to like 900 next week, 950 the week after that, and we can get on the other side of this expiration. After that, we're solid because 50 of these 150 would now be covered cuz these 50 would come off the books, and 100 naked calls for portfolio of our size is actually very, very manageable. We have the one We have the 5,000 shares that we could deliver at 1,100 for a real nice tidy pro- profit. And then I could keep rolling those calls over and over again, and at some point I could pick up another 5,000 shares and deliver those 5,000 shares for a profit, and then down the road buy another 5,000 shares and deliver those shares for a profit as well. Or I can continue to roll and roll and roll and roll and have everything expire out of the money eventually.

5:48 All the while these 500 short puts are printing. This is the easy money over here. It's always been the easy money on the trade. That's the reality. And I want to keep doing this one over and over and over again year after year after year after year after year picking up, you know, 750 a million bucks a year over and over. That is my thesis on Micron. It isn't about all this other stuff with memory and I'm just looking I just looked at the chart. I looked at the story and I'm like I think this thing's going to stay over 350 bucks. I think the the bottom the baseline now is probably more in the 500 to 700 dollar range. That's what I think, but I'll know more after earnings cuz I'm really going to listen intently and see what's going on. But anyway, that is the Micron position in a nutshell. So, we are not off to a good start, which is par for the course for me. Usually when I take on a new position, this is what happens.

6:44 Get my ass kicked. So, if I was the same thing, right? It was the same thing. Marathon, CleanSpark, all the same thing. Actually, on CleanSpark, I don't think that's totally true. I don't think we really ever got our ass kicked on CleanSpark. But for the most part, we usually get our ass kicked and then I have to figure out how to manufacture the win and that's exactly what's going on with Micron. TJ Wollard saying no. Sorry skies to blue stock screen. Peace out. God bless you guys. I will be out of pocket for about a week, so nothing coming out of you for about a week or so.

Summary

TJ discusses his current position in Micron, where he holds 5,000 shares purchased at $1,044, now valued at $854, resulting in a significant unrealized loss. He outlines his strategy involving covered calls, naked calls, and short puts to mitigate losses and potentially profit from the situation.

- Holding 5,000 shares of Micron at $1,044, currently down about $200,000.
- Implementing 50 covered calls at a $1,050 strike to generate $81,000 if shares remain below that price.
- Selling 150 naked calls at $1,100 as a risk management strategy to protect against further declines.
- Short puts at $350 could yield an additional $818,000 if Micron stays above that level.
- Ideal scenario involves Micron leveling off or gradually increasing in value to facilitate multiple options cycles.
- Emphasizes the importance of managing risk and the potential for rolling options to capture premiums.
- Plans to reassess the investment thesis after the next earnings call for a more informed decision.
- Aims to generate consistent profits through strategic options trading, despite initial losses.