Assigned on PTON Covered Calls, Realized Profit of $21,915 in 155 Days, Return of 32.4% or 76% Annualized.

Over the past 155 days we have been developing our PTON covered call strategy by rolling weekly options (see table below for the weekly rolls). On Friday our order to roll did not get executed and the shares got called away. We didn’t want the shares to get called as it creates a tax liability (short term capital gains). Our plan was to keep rolling until we had held the shares for 12 months and taxes would be at the long term capital gain rate. However, a realized gain is better than a loss so happy with the outcome.

Highlighted in the green …..We attempted to buy Puts for downside protection….and lost over $10,000 of “insurance” money. I don’t plan on purchasing Puts as insurance going forward. I am looking for a way to “hedge” the volatility. Considering selling deeper “in the money” calls as one option.

We do plan on establishing a new position this week selling “at the money” puts and looking to be assigned (collect the premium to discount acquisition price).

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.