Follow up to ABT post on 10/21 about buying back Oct 23 $107 Calls

Market had a positive day yesterday which helped Abbott with the bounce back up. Abbott was up by as much as $4 yesterday.

We reestablished the covered call position selling October 30 $111 Calls for $1.31 when the stock was trading at $110.

The combination of buying back the Oct 23 $107 call, selling the Oct 30 $111 call and rebound in stock price added over $7,000 of profit to the position which is generating $18,342 in profit.

Buying back short calls when a stock drops isn’t an automatic strategy we employ….but when we are confident in the stock it can generate short term profit.

EW (Edwards Lifesciences) stock had a similar experience to Abbott yesterday after announcing good quarterly revenue and earnings. Stock dropped $4. With market poised to opend up it could follow a similar trend as Abbott….but don’t take this as a recommendation….just identifying a similar pattern on another high quality medical device company.

Update on ABT CC, Profit $8,497 in 87 Days, 31.1% Return or 130% Annualized

Our Covered Call strategy on ABT was established on May 26. Since that time we have added to the position with 300 shares on 6/25 and 400 on 8/21. Covered Calls on Abbott have performed well aided by a strong upward move in the stock. We have rolled the options 13 times and had two expirations. Abbott is attractive for CC Writing as it trades weekly options, potential for growth on the stock price and pays a dividend.

Assigned on IHI CC’s, Profit $20,571 in 139 Days, 11.5% ROI or 30% Annualized

On Friday our order for a diagonal roll on IHI did not get filled resulting in assignment of shares at $280. Preference would have been to keep the shares and continue to roll the monthly options.

We established the position 12/3/20. Fortunately the stock is in our 401(K) so no short term tax implications.

IHI has been a good ETF for covered call strategy. A replacement position will be established this week. IHI is one of the “base” components of my accounts. I believe in the long term potential of the medical device category. IHI spreads the risk across 50 of the top names in medical devices. Excellent return on 1, 3 and 5 year periods.

IB Account – YTD +61% vs S&P +9%

Our portfolio continues to outperform the S&P by a wide margin YTD.

Current holdings in the account. All six positions are profitable. Selling options has helped on three of the six positions. On Friday we did a weekly diagonal up on EW . Our option on PYPL expired and we sold a new call at $195. Five of the six stocks are in the health sector.

Changes over time in the profitability of the individual positions are shown below.

Is VIAC a good candidate for covered call writing?

We liked the potential VIAC represented (believe the idea came from

  • Weekly options
  • Great dividend
  • History of stock growth
  • Good option premiums

We opened a CC position on Jun 4 with the goal of capturing the $.24 dividend (Jun 12) and the option premium. Stock quickly jumped up in price and then fell back below what we paid (blue line in chart below). After the stock price fell and our Jun 19 $24 call expired at $0 we didn’t sell additional options hoping for stock price to rebound. On Jul 14 we started selling calls again. We have done calendar rolls at the $25 strike price each Friday.

In 70 days the position has generated profits of $5,050, 21.3% or 111% annualized. Very pleased with the return on this quality stock. I think it is a great CC candidate. Plans are to continue to roll the calls and capture the upcoming dividend in Sep.

Covered Call on ISRG Assigned – Profit of $6,944 in 67 Days, 12% ROI or 66% Annualized

On Friday ISRG closed above our strike price of $675 resulting in assignment of the shares. Shares were originally purchased on June 1. Over the 67 days we held the stock we adjusted our position on a weekly basis as shown in the table below.

Rapid rise in stock price between July 13 and 20 created a scenario where it would have been more profitable to just purchase the stock versus the covered call strategy. Can’t complain about a 12% return in 66 days……but it could have been higher.

Covered Call on PYPL, -$330 in 5 Days, -.4% or -27% Annualized.

On 7/13 we established a CC on PYPL. Stock fell over the next couple of days. On Friday we opened a second CC purchasing the stock at a lower price and writing a lower priced option ($175). We also did a calendar roll on the $177.50 call options for a net credit of $2.04. PYPL has performed well during the COVID recovery as more people are seeking non cash payment methods (Venmo).