Is Smile Direct Club (SDC) a good candidate for Covered Calls?

Visual of Position Profits

We have had success with SDC in a covered call strategy over the past 172 days. We had the good fortune of buying shares of SDC at $4.50 and $4.67 in late March/early April when the price had dropped in response to the Covid pandemic. The strategy has generated profits of $206,322 generating an ROI of 229% or 486% annualized. Position remains open with 34,700 stock as the basis for writing calls (write 347 calls a week).

Over the 172 days we have rolled the weekly options 29 times (rolls up, down, diagonal, and calendar).

On a weekly basis an “at the money” call option sells for between $.30 and $.40….great premium for a $12 stock (2.5 to 3.5%).

If you believe in the market opportunity Smile Direct Club is chasing the stock appears to be a good candidate for holding and writing calls against. Recent stock jump has created a higher return on just holding the stock versus writing the calls….but I like the 2-3% downside protection the options offer in these volatile times.

My adult son and 50+ sister-in-law have both used SDC with success. It is easier to invest in a product where you know satisfied customers.

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