Closed MU Covered Call/Iron Condor for profit of $4,346 in 52 Days

Yesterday (3/24) we closed our position in MU. We opened it on 2/1/21 as a covered call (Bought 200 shares @$79.71 and sold 2 Feb 12 $80 calls @$2.53. On February 23 we closed the covered call (Blue line goes flat) and opened an Iron Condor (Sold 20 Contracts April 16 +$65P/-$75P and -$105C/+$115C. Our goal was for the stock to remain between $75 and $105 so we could keep the premium collected. We closed the position yesterday as we were exceeding 50% of the max profit potential. The combination of CC and IC generated profits of $4,346 ($1,754 with the stock and $2,592 with the options).

Update on Iron Condor Learning/Strategy, Shutdown IC on MU today

One bright spot on a tough market day was closing the Iron Condor on MU. Details on the transaction are below. Profit of $3,360, a Return on Capital of 22% in 27 days, 83% Annualized. This is a much better return than I have been achieving trying to capture dividends over the past couple of weeks!

We followed the Tastytrade.com recommendations when we set up (51 Days to Expiration) and closed the trade (21 Days to Expiration or 50% of max profit….we closed it based on exceeding profit goal). We have a series of IC’s coming due over the next week…..but this will likely be the most successful. This is one of the few IC’s where we were able to get a credit equal to 1/3 of the width between the strikes ($10 width, $3.36 credit). The volume on MU options is high which helped with both the entry and exit. Other IC’s I have are more challenging to exit due to the wide spread between the bid and ask prices. The IC’s are above the 50% profit target but I can’t get filled and remain above the target. I may have to hold them through expiration.

ABT (Abbott Laboratories) as a Covered Call Candidate

ABT had a very bullish article come out on Seeking Alpha (much better than I could write about the stock – look it up if you are interested). I have held shares in the company for over 30 years. The information below depicts my current position. Shares were purchased May 26, 2020. The tracking tool was updated in January and the history was lost so the data starts Jan 24. I have been writing weekly calls against the stock. Combination of stock, options and dividend are generating a profit of $28,686 for an annualized return of 23%. Not a “high flyer” but a solid medical device company with a long history of success.

The red line in the graph shows the profit/loss from the options. In the last month I started writing bullish put spreads along with the covered call. The goal is to generate more option premium. If the stock drops below the short put price I am okay with getting assigned more shares as I am bullish on the stock long term. Since adding short puts to the strategy I have reduced the losses on the options. Usually when the blue line (stock profit) goes up the red line goes in the opposite direction and offset some of the gain. The blue line has increased in the past couple of weeks but the red line held ….resulting in more profit. I sold another put spread this morning that isn’t reflected in the data yet.

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.

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.

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…….

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