Update on AMZN Covered Call Strategy after 277 Days, +$92,620, ROI 81% or 107% Annualized

AMZN CC strategy continues to perform well. Tables below show the continued progress. In late January I switched the tracking software so the graph starts with the historical profit on the stock, option and net as of Jan 25. In the tables below it shows our all time profits on AMZN as well as the Current Position Profit. On the right is the current position in our portfolio.

The table below shows the importance of the call premiums. On 1/25/21 we had a profit on the stock of $90,011 and a loss on the options of $5,700 for net gain of $84,311. In the next 25 days the net price of AMZN declined and our profit on the stock dropped from $90,011 to $85,601. The option premiums collected during the 25 days (we rolled the options 14 times….to mostly ATM strike prices) improved the profitability on the options from ($5,700) to $7,019. Despite the drop in stock profit our overall net profit on the position increased from $84,311 to $92,620. Historically we have been challenged to create profit on the short options as the stock price continually increased. In the past 25 days the covered call strategy is performing the way we would hope.

This is not investment advice. I am sharing a position that has worked out well for me. No guarantee that it will work out in the future. Individual investor….not a licensed professional.

Covered Call on NIO, Unrealized profit of $56,870.

We established the covered call position on NIO on Aug 20, 2020. It has been a wild ride with the stock driving profit of $87,917 and the options generating ($31,047) for a net profit of $56,870. We have been rolling the options on a weekly basis trying to maintain “at the money” options. Despite the excellent option premiums it has been a challenge to write profitable options which is typical with stocks that show substantial appreciation in a short period of time. Intent is to keep NIO for the long term as it has excellent upside….but we need to modify our option approach as we are not optimizing the potential.

Closed out DXCM CC, Profit of $4,252.

DXCM announced earnings today after the market closed. We decided to sell our shares and buy back the options to avoid the wild swing that follow the announcements. History was projecting the stock would move +/- 8% ($32).

We established the position on July 20/2020. We rolled the position 18 times. All of the profit was generated by selling the options. The stock was purchased for $432, dropped as low as $360 then recovered to $400.

DXCM has been a core holding in my investments for the past 10 years. When the dust “settles” I will likely start a new position.

$432

Closed CC on CFG, Profit of +1.7% in 13 Days, 47.8% Annualized

We closed our covered call on CFG today. When we opened the position on 1/26 our goal was to capture the $.39 x 500 shares dividend ( x-div on 2/20). We made a small profit on the covered call ($140). We pick up an additional $195 in profit when the dividend is paid for a total profit of $335. Our investment for the covered call was $19,600 (Cost of stock minus option premium received). ROI was 1.7% in 13 days or 47.8% annualized.

The graph below shows the daily profitability of the position. Share prices fell immediately after we established the position. As the stock recovered the net daily profit of the covered call (yellow line) improved. We started making money on the covered call on Feb.5.

We closed the position down to decrease our margin in the account. On Friday we “rolled up” a lot of stock which increased the margin to an uncomfortable level.

New Covered Call on IBM

We established a new CC on IBM today purchasing 200 shares at $119.65 and selling 2 Feb 19 $120 Calls for $1.53. Net price was $118.12 (stock price – option premium received).

IBM has a $1.63 dividend coming up (ex-div on Feb 9).

If IBM stays above $120 our potential profit is $3.41 (difference between net price and strike price ($1.78) + plus the dividend ($1.63)) or 2.9% in 15 days). We are not planning on holding the shares for the long term….just looking to capture the dividend and some premium over the next two weeks.

New Diagonal Bull Put Spread on ATEC

In our Schwab 401K account we have had success with a covered call strategy on ATEC. We established the CC position in Oct 2020. Since then we have rolled the options 7 times resulting in an overall profit of $22,864. Based on the success with the stock and favorable outlook and recommendation by Canaccord we expanded our position to include a Diagonal Bull Put Spread.

We established a “defined risk” put spread versus just selling the puts naked. We sold “at the money” Mar 19 $15 Puts for $1.64. and purchased Jul 16 2021 $12.50 Puts for $1.71 as a “back stop” to our short put position.

Our maximum risk is the spread between the long ($12.50) and short ($15.00) strike prices (= $2.50 per share).

Our goal is for ATEC to remain above $15 allowing the short Mar $15 puts to expire at $0 then sell April puts (hopefully followed by May, Jun and Jul Puts).

We are prepared to add to our ATEC stock position if the trade goes against us and we have to purchase the shares for $15.

This is not investment advice….just sharing a personal trade.

New Covered Call on DHI (Home Builder)

Established new CC on DHI. Bought 200 shares @$77.68 and sold 2 “in the money” Feb 19 $75 Calls for $3.94. Net price $73.74. If stock stays above $75 potential profit of $1.26 on the position + $.20 dividend (ex div 2/16) = 1.9% in 17 days, 43% annualized. Almost $4 of downside protection on the position.

New Covered Call on KBH

We initiated a new covered call position on KBH (home builder). We purchased 300 shares @$42.52 and sold Feb 19 $43 Call options for $2.025. This is the first time we have done a covered call with a real estate developer/builder. Recent financial results were excellent. Stock goes xdiv of Feb 3 with a $.60 dividend.

Picked up the idea from CoveredCallAdvisor.com. Had success following some of their ideas previously. They were more conservative and sold a deeper in the money call. My goal is to pick up the dividend and continuing writing call options against the stock for a few months.