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.
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).
On August 31 we initiated a covered call position in PTON with the purchase of 200 shares at $77.26 and sale of 2 Sep 4 $77.50 Calls for $3.03. Over the 33 days we have rolled the options five times in response to movements in the price of the stock or the options expiring. The table below has the transactions. For example…the Sep 4 $77.50 calls we sold on Aug 31 for $3.03 were repurchased on Sep 4 for $1.94 generating a profit of $218. On Sep 4 we also sold Sep 11 $77.50 (Calendar roll – same strike, one week later) for $6.54. During the week leading up to Sep 11 PTON stock increased in value. When we repurchased the Sep 11 $77.50 option on Sep 11 we paid $12.41 generating a loss on the option trade of $1,174. The transactions continued as shown below.
PTON stock has increased in value from $77.26 to $107.51 over the 33 days. The CC strategy has been profitable (198% Annualized ROI) but not as profitable as just owning the stock. The position remains open looking for the stock to stabilize around $105 this week.
Yesterday I ordered a Peleton+ bike for about the amount of the profit…..does that make it free???
On Friday PTON stock closed above our strike price of $66 and stock was assigned. We purchased the stock on July 20. Calendar roll on 7/24 and Diagonal Roll up from $63.50 to $66 on Jul 31. We had an order in for a diagonal roll up on Aug 7 but didn’t get filled resulting in the assignment. Intend to establish a new covered call position in PTON today.
On Friday 14 Jun 5 $42.50 covered calls on PTON were assigned and called away. We tried to do a diagonal roll to Jun 12 $45 but the prices were not reasonable so we let them get called away. We established 36 new covered calls on Friday in anticipation of assignment and wanting to continue to have a CC position in PTON. We have been working the PTON covered call position for 49 days. We rolled the strike prices up, down and out.
The assignment created a profit of $8,492. We generated profit on both stock appreciation ($6,750) and short options ($1.742). PTON is a volatile stock driving excellent option premiums.
Starting April 20 we worked our CC strategy on PTON. Over 43 days we have done 5 “Diagonal Roll Ups”, 1 “Vertical Roll Down”, 2 Calendar Rollouts” and been “Assigned” once.
Current calls are deep in the money due to rise in stock price this week.
The recent rise has increased the profitabilty of the stock and increased the losses on the options.