Update on Guidewire Stock and Covered Call Position

Update on Guidewire Stock and Covered Call Position

Our covered call sale on Guidewire is backfiring a little bit – the stock keeps going higher!

An excellent quarterly earnings report is to blame.  Guidewire keeps on closing deals and collecting recurring checks from existing customers.  The result: GWRE has rallied from $26 to $32.15, straight through my strike price of 30.

So the bad news for me is that my shares may be called away later this month.  The good news is that I’ve enjoyed a 50% appreciation on the underlying positon, and will get to keep the additional premium, an additional 5% of my position at the time.

How much is left in this rally?  Buying pressure remains quite strong, as indicated by the high CMF reading at the bottom of the chart.  The 10-day MA is still running ahead of the 20-day EMA, showing that the long term trend is still strong…but slowing, as you can see by the slope of the blue line.

GWRE jumped on blockbuster earnings news, and the trend remains up.

If my position does get called away, then we’ll keep an eye on the technicals to find an appropriate re-entry point.  This, I suppose, is the danger of selling calls against growth stocks versus stodgy blue chips.  If this had been Intel that’d run up so far so fast, I’d gladly sell and wait for a retracement!  My emotions are mixed when it comes to GWRE.