DXCM announced earnings today after the market closed. We decided to sell our shares and buy back the options to avoid the wild swing that follow the announcements. History was projecting the stock would move +/- 8% ($32).
We established the position on July 20/2020. We rolled the position 18 times. All of the profit was generated by selling the options. The stock was purchased for $432, dropped as low as $360 then recovered to $400.
DXCM has been a core holding in my investments for the past 10 years. When the dust “settles” I will likely start a new position.
Executed a trade today based on a Tastytrade.com recommendation. If you are not familiar with Tastytrade.com I highly recommend you visit the site. I think it is the best web site for learning about options and trading strategies. Today they had a recommendation for an Iron Condor on CHWY. We followed the recommendation but modified the “wings” a bit. Stock was trading at $109 when our trade executed (table below).
Our goal is for the price of CHWY to remain between the strike price of the short put $95 and the strike price of the short call ($125) on Mar 19. Maximum potential profit is $2,646.72 in 31 days (credit received when we established the position). Tastytrade recommend exiting if you hit 50% of max profit or $1,323. Maximum potential loss is $7,353 ($20 spread on put/call strike prices x 500 shares – premium received).
I am looking to gain experience with Iron Condors so this will be ” hands on” learning.
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.
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.
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 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).
April was a great month for investors despite uncertainty created by Covid-19 and oil. The account hit a record high late in the month. Option “premiums” are related to volatility. High volatility = high premiums. Options premiums in April were attractive (good for covered call writing). Weekly options are generating % premiums one would expect for a month option.
As we exit the month the we have covered calls on 10 stocks:
Stock = Ticker, G/L Stock = gain or loss on the stock. G/L = gain or loss on the cumulative option trades (roll up, down and out). Net = are we making money on the individual stock strategies and overall. We are making money on 8 of 10 positions. DXCM, EW and SDC are driving performance and represent a significant % of the account capital. Surprisingly two medical supply companies (Cardinal Health CAH, Steris STE) are losing money despite the shortfall in PPE. Might have been too late into the stocks. I know nothing about oil stocks so positions in Chevron (CVX) and Haliburton (HAL) are limited and educational.