Covered Call Strategy with SDC (Smile Direct Club) after 422 Days, $144,230 Unrealized Profit, 123% Return or 107% Annualized Return

We have been managing a covered call strategy on SDC for well over a year now. The excellent option premiums received when we roll the calls on a weekly basis have resulted in the options generating a profit of $53,309 in addition to the $90,921 generated by the stock..

The graph below illustrates the daily profit of the stock and options. It covers the period starting Jan 24 when we started with a new tracking system. The blue line on the graph shows the drop in stock profit from over $200,000 in January to under $100,00. Covered calls have offset some of this decline. The red line shows the increase in option profits from a loss to a profit of $60,000. Considering the stock has dropped from over $14 to $11 we are pleased with result (we initially purchased the stock at under $5). It is challenging to find a covered call strategy where both the stock and options are generating profits.

The approach has allowed us to build up a nice long term capital gain we can sell to “titrate” against short term losses generated by rolling up options on other covered call positions.

LNC Covered Call Strategy after 267 Days, performing well but leaving money on the table….

Information below summarizes how our CC Strategy on LNC is performing after 267 days. We are generating profit of $23,009 (including $2,040 in dividends). The graph tracks the daily profit/loss for the stock and options over time. We started using a new tracking system in January so it does not have all for the history. From the graph it is clear we have left money on the table by writing call options that were too conservative (either “at the money” or slightly “in the money”). The stock profit (blue line) and option loss (red line) are basically offsetting leaving us with a net profit that has been flat since Feb 7. If we believe LNC will continue to perform well we should be more aggressive and sell out of the money options (which reduce our downside protection) or add out of the money bull put spreads.

The position has returned 32% or 43% annualized……but it could be doing much better if we had adjusted our approach.

From a taxable viewpoint the options have generated short term losses of $33,911 some of which we used in 2020 taxes. Holding the stock until 6/25/2021 will allow us to pay long term capital gains on the $54,880 gain.

Assigned on INMD, Profit of $6,675 in 66 Days, 25% Return or 140% Annualized

We were assigned on Mar 19 $70 Call options on INMD this morning. We had an order in to roll the options to Apr 16 $70 Calls but didn’t get filled (couldn’t get a reasonable premium) so the shares got called away. Disappointing as our preference is to hold the stock for 12 months before allowing it to get called away so we pay long term capital versus short term capital gains.

We believe INMD is a good long term stock to hold and plan on establishing a new position next week.

The chart below shows the daily progression of the profit/loss on the position. The shares rose from our purchases price of $52.71 in January to over $70 on Friday. We rolled up the options three times. Despite rolling up the options we did not collect enough premium to offset the costs of rolling. The options lost $1,972.

Table below shows the transactions associated with the position.

IB Account Update – Performing much better than larger Schwab accounts where I invest far more time to manage!

YTD IB account is up 13.3% vs the S&P up 5.7%. The account is within $1000 of all time high. My Schwab accounts are down 5% from all time highs…..despite much more effort managing those accounts. Maybe too much effort!

In the Schwab accounts I have been experimenting with Iron Condors, Bull Puts spreads, SPY, dividend capture strategies and the TastyTrade guidelines (set up positions with 45 “Days to Expire” and exiting at 50% of max profit or 21 DTE. Too early to tell but so far the IB approach of setting up weekly or monthly covered calls and letting them run their course seems to be performing better. The Schwab accounts are much larger requiring more positions for diversity.

When is too much management too much…..

Covered Call and Dividend Capture for FOXA – 2 Days, 1% Return on Capital, 234% Annualized

On 3/8 we established a covered call with the intent of capturing a dividend. We purchased 500 shares of FOXA shares and sold a Mar 12 $41 Call. The dividend of $.21 went exdiv of 3/9. We sold the shares on 3/10. The shares appreciated in value generating a gain of $315. The stock appreciation resulted in the option losing $182 when we repurchased the option to close the position. The dividend generated $115. Overall the position generated $255 in profit in two days.

This is one of our first attempts at using covered calls to capture a dividend and exit the position immediately after it goes exdiv. We have a number of similar positions to see if we can consistently generate good short term profit with the strategy.

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.

Iron Condor (IC) on ABT, DXCM

Our IC on ABT lost money this week as ABT stock increased in value. The table below shows the current status (ignore the -15 ABT 02/19/2021 $127 Calls as they are part of a covered call).

The “wings” of our IC include a call spread of $125/$135 (10 point spread) on the upper side and put spread $110/$120 (10 point spread) on the lower side. When we established the IC we received $13,255 in premium for selling the two spreads.

Max Profit = Premium Received.

Max Loss = Spread between the wings (10) * #contracts (30) * 100 shares per contract – Premium Received = $16,745.

Current stock price of $128.23 is above the lower strike on our call spread.

To realize max profit we need ABT to be between $120 and $125. When we set up the IC it seemed like a reasonable assumption. In hindsight I should have used a wider range. A wider range would have reduced the premium received (Max Profit) but increased the probability of the stock remaining inside the range. Position is currently losing $1,225.

The position has a lot of time left (expires March 19) and ABT may drop back. If the price goes above $135 we will incur the maximum loss. We do have an option of rolling up the Put from $120 to $125 which would generate additional premium and reduce the maximum loss.

Yesterday I established a new IC on DXCM following the earnings announcement. Took the lesson learned about wider range. The options in the table below with the quantity 20 and -20 make up the IC. The spread between the put spread ($360) and call spread ($460) is much wider than what we did on ABT IC. The stock has a $100 range to move and allow us to make maximum profit. Our Max profit is the sum of the premiums received ($15,680). Max Loss is the spread of the wings (20) x number of contracts (20) x 100 shares per contract – Premium Received = $24,320. Current profit is $1,340…….

Good Week and New High in IB Account, +4.31% in the week, +11.85% YTD

IB account had a good week gaining over $16,000 helped by $10,700 gain on Friday. The 11.85% YTD is more than double the 4.76% for the S&P. This is the first time the account has crossed $400,000.

Dexcom announced earnings on Thursday after the market closed leading to a wild swing. It was down almost $20 in early trading and rebounded to close with a small gain.

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.