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.
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.
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.
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.
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.
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.
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.
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.
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!
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.