IB Account Wk Ending 10/16 – Trades and Positions – +$13,917 or 4.2% in the week

Good week for the account with a net gain of 4.2%. We didn’t add or eliminate any positions. Nice rebound by Dexcom (DXCM) helped with the performance.

Six of the seven positions are profitable. PYPL remains our only negative position. PYPL stock had a good week…but we were short $195 calls so didn’t get to benefit in the rally. It was another week when our cautious position of selling “in the money calls” left money on the table. The DXCM roll up on Friday from $400 to $420 was really surprising. Rolling up $20 we generated a credit premium of $17.51…..pretty amazing. Someone is optimistic about where DXCM stock will be by Nov 20 (has to be $420 +$17.51 = $437.51 for them to break even vs current $405). In my Schwab account I rolled to Dexcom $450’s.

Prior to making the trades on Friday I was expecting to exit positions with monthly options and wait until after the election before starting new ones….and then I saw the premiums and couldn’t resist rolling. I might regret the trades post election…..

Is Smile Direct Club (SDC) a good candidate for Covered Calls?

Visual of Position Profits

We have had success with SDC in a covered call strategy over the past 172 days. We had the good fortune of buying shares of SDC at $4.50 and $4.67 in late March/early April when the price had dropped in response to the Covid pandemic. The strategy has generated profits of $206,322 generating an ROI of 229% or 486% annualized. Position remains open with 34,700 stock as the basis for writing calls (write 347 calls a week).

Over the 172 days we have rolled the weekly options 29 times (rolls up, down, diagonal, and calendar).

On a weekly basis an “at the money” call option sells for between $.30 and $.40….great premium for a $12 stock (2.5 to 3.5%).

If you believe in the market opportunity Smile Direct Club is chasing the stock appears to be a good candidate for holding and writing calls against. Recent stock jump has created a higher return on just holding the stock versus writing the calls….but I like the 2-3% downside protection the options offer in these volatile times.

My adult son and 50+ sister-in-law have both used SDC with success. It is easier to invest in a product where you know satisfied customers.