This morning we initiated a new CC in RTX. Purchased 1000 shares and sold 10 Feb 26 $74.50 Call options. Net price was $72.33. In addition to capturing the call premium we are looking to capture the dividend of $.475 that goes ex-div 2/25. Stock is up $.93 since we bought the position. Max profit if the stock reaches and stays above $74.50 is $2.17 ($74.50 strike price – net price of $72.33) + dividend ($.475) = $2.645 (3.7% in 7 days). Our break even is $72.33 (net price) – $.475 (dividend) = $71.855. Our intent is to capture the dividend and exit the position next Friday.
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.
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.
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.
We liked the potential VIAC represented (believe the idea came from Coveredcalladvisor.com)
- 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.
On July 17 our $93 call options were expiring “in the money” (stock above the strike price). Rather than have the stock called away we did a diagonal roll up to the Jul 24 $96 at a net cost of $2.50 (incremental investment. MDT has a good history and pays an excellent dividend (next ex-div date in late September.