Each of the charts below represents a covered call position in the IB account (with the exception of PINS which is a bull put spread). Total Profit/Loss is in the top section. Return on the position and annualized return is in the second table. Graphs show where the profit/loss is coming from (stock or option). In an ideal covered call the net profit would be higher than either the individual stock profit or option profit components (see ATEC at the bottom). With ATEC I added additional option elements at different times which seems to have helped with option profits. The bull market over the past eight months has pushed stock prices up making it difficult not to “lose” money when we buy back the short call options. Each time we “lose” money on an option roll up it creates a short term capital loss we can use for tax purposes. Once we establish a position we rarely sell the stock until we have held the position for 12 months so we only pay long term capital gains.
Author: jefflsmith
Individual investor with focus on growth and income utilizing covered call writing primarily with health care companies.
IB Account Wk Ending 1/22/21 New high of $381,160, +$16,564 in the week, +4.5%
Market had a good week which is reflected in the account performance. YTD the account is up over 6% versus 2.3% for the S&P 500 Index.
Current account positions are in the table below. 10 of 11 positions are profitable. Most of the positions had bullish rolls. BCRX, DXCM, INMD were vertical rolls (same expiration date, higher strike) and NIO and PYPL were diagonal rolls (next expiration and higher strike price). PTON was a calendar roll (next expiration and same strike price). SDC was a negative diagonal roll as the stock price dropped during the week. New calls were written on STE. No change to ATEC or PINS position.
Covered Call on NIO generating unrealized gain of $23,447 in 115 days, 129% or 410% annualized.
On Sep 16 we established a CC on NIO when we purchased 1,000 shares of NIO at $18.17 and sold 10 Sep 18 $18 Calls for $.41. Over the next 115 days we have rolled the calls 20 times and sold naked puts once .
Transactions are in the table below.
We have primarily sold “At the Money” options. The continual rise in the price of the stock has forced us to repurchase the short calls at a loss creating an overall loss on the options of $17,305. We attempted to be more aggressive in rolling the options in the past month but the stock has risen from $42 to $59 making it a challenge.
Our intent is to continue to roll the options and keep the stock for at least 12 months when the capital gains on the stock will be taxed as long term gains (15%). In 2020 we will benefit from the option losses as they will offset some of the capital gains.
ATEC Position, Covered Call + Naked Put Generating positive results, Unrealized gain of +$1,687 in 28 Days, ROI 28.9% or 377% Annualized.
On 12/11 we opened a CC position on ATEC by purchasing 500 shares and selling 5 Jan 15 $10 Call options. In we also sold 5 naked Jan 15 $10 Puts as we were bullish on the stock and prepared to buy an additional 500 shares if assigned.
In subsequent trades we rolled the Jan 15 $10 Calls to $12.50 and then to $15. We also rolled the Jan 15 $10 Puts to $12.50.
Table below is a summary of the transactions.
IB Account Week Ending 1/8/21, +$17,979 or 4.19% Return
The year is off to a good start with the first week generating a return over 4% versus S&P 500 at 1.83%.
Open positions and changes are in the table below. Lots of Diagonal and Vertical Rolls on Friday as the market was moving up. Carrying unrealized gains of $123,627.
IB Account up $32,611 or 9.9% in December, 2020 finished up $163,989 or 83.7%.
December was a good month generating capping off a great year. I wish the account had a history of performing at that level but that would not be factual. Historically a return of 2% per month was the target. Some months we met the goal, some months we missed. In 2020 the combination Covid and politics created an environment that was very conducive to covered calls and high premiums. It is highly unlikely the return of 80%+ will be repeated in 2021….but one can always hope.
We outperformed the SPX by a wide margin (87% vs 16%). Key to the performance was selling most of our positions in early March as news of Covid created uncertainty. This gave us cash to fully invest in April after the crash and participate in the rally. As the say…….Good to be Lucky…..Lucky to be Good.
Covid created an environment that freed up much more time to spend on investing. In the past I would spend about 10 hours a week trading. Now I spend five or six times that…..and probably over trade. Optionsbistro.com has been a fantastic resource for both trade ideas and learning.
Hope some of my experiences and sharing of strategy/trades has helped you make a higher return in 2020. Look forward to the start of a new trading year on Monday!
Assigned on EW Covered Call, Profit of $3,498 in 63 Days, ROI of 8.8% or 51% Annualized
On October 26 we established a covered call on EW. Over the next 63 days we rolled the calls on a weekly basis. We also tried buying buying “insurance puts” in late November. On Friday we were “rolling up” a lot of our covered call positions which requires incremental cash. To avoid increasing the margin in the account we decided to let the EW shares get called away. Not sure it is a good time to shut down the position as the graph shows the upward trend in net profitability over the past couple of weeks.
Table below shows the activity with the stock and the options over the past 63 days.
Happy with the return on the position…..I do believe EW is a medical device stock to hold for the long term……so might consider another position in the near future.
IB Account Week Ending 12/18/20, New High, New Position on BMY
Our IB Account had a good week increasing by 4.23% to $358,143 a new high. MTD Dec is up 9.5%.
Account positions are in the table below. On Friday the monthly and weekly options expired. In the column below under Options we show the trade/position we moved into for next week/month. ATEC, BCRX, DXCM and STE are monthly options so the diagonal trades changed our positions from Dec 18 expiry to Jan 15 expiry. The positions are carrying an unrealized gain of $101,089.
Last week we opened a new position on BMY. We are bullish on the stock and looking to capture the upcoming $.49 dividend. We were aggressive in setting up the initial position. We purchased the stock at $61.52, and sold Dec 24 $65 Calls for $.11 to establish the covered call. We also bought a Dec 24 $63/$65 Bull Call Spread (looking to make a profit on the stock rising and closing at $63+ at expiry on Dec 24) and sold a Dec 24 $62 Put (looking to generate profit by capturing $1.08 premium if the stock stays above $62….with the risk of having to purchase more BMY shares if the stock were to go below $62).
On Friday we closed the Bull Call Spread selling the Dec 24 $63 Calls and buying back the Dec 24 $65 Calls making a small profit on the position. Goldman Sachs had upgraded BMY and increased the target price from $82 to $86 which made us comfortable with the bull call spread strategy anticipating the stock would run up. When the run up seemed to stall on Friday we closed the bull call spread.
If the three days the position has been open we generated a mostly unrealized profit of $734, a return of 4% or 484% annualized so far.
Assigned on PTON Covered Calls, Realized Profit of $21,915 in 155 Days, Return of 32.4% or 76% Annualized.
Over the past 155 days we have been developing our PTON covered call strategy by rolling weekly options (see table below for the weekly rolls). On Friday our order to roll did not get executed and the shares got called away. We didn’t want the shares to get called as it creates a tax liability (short term capital gains). Our plan was to keep rolling until we had held the shares for 12 months and taxes would be at the long term capital gain rate. However, a realized gain is better than a loss so happy with the outcome.
Highlighted in the green …..We attempted to buy Puts for downside protection….and lost over $10,000 of “insurance” money. I don’t plan on purchasing Puts as insurance going forward. I am looking for a way to “hedge” the volatility. Considering selling deeper “in the money” calls as one option.
We do plan on establishing a new position this week selling “at the money” puts and looking to be assigned (collect the premium to discount acquisition price).
IB Account Update and Positions
Account gained 1.39% last week increasing the account by $4,649. Still not back to all time high ($347,541) but we are getting close.
YTD the account is up 77.59%.
We carry 9 positions forward into next week. The tickers with the P at the end were positions where we added a long put to the covered call strategy. We exited most of the Puts on Friday as the cost of the “insurance” was exceeding the benefit (may regret it one day when the market has a significant drop). Adding complexity (Puts) to the CC positions made it difficult to track and monitor the profitability. Selling calls that are more “in the money” may be a more effective insurance (it will reduce potential return as a trade off).
8 of the 9 positions are profitable. We are carrying unrealized profits of $82,776. ATEC CC was a new addition last week. Dec 18 will be a big trade day as all of the positions have calls expiring.
