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JMIA is on fire and though there is room to run higher, we have 200 shares in at an average cost of around $6.00. This is an area to take in some profits and there are several ways to do this. The simple method is to simply sell 10-20% of your position at this level.
The second method is to sell a Covered Call against half our shares, or if you have at least 100 shares this is an option as well. IF you do NOT have at least 100 shares this is not a trade for you, you can get run over and liquidated selling Naked Calls. IF you are not comfortable with options stick with plan “A” which is to just trim a little into strength.
The third method, and what we are going to do here, is to implement an options collar or a Covered Call and using the proceeds from selling a Covered Call to buy a Put at the money.
Since we have 200 shares we are going to sell one (1) Covered Call at the AUG $14.00 strike for 2.10 (plus or minus) and Buy the AUG $14 Put for around the same amount.
This is a good strategy for locking in half our position at $14.00. IF the market moves higher, our shares are called away and we locked in half our position at $14 making the remaining position free or actually paid to hold the stock. IF the market moves lower, pushing back to the 9.00-10.00 area we are making money on the PUT and CALL option. The Call premium will decay and the PUT option will go up. This is a Covered Collar if you want to google it.
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