Monday, June 8, 2015

ESV Covered Call


Today I sold an ESV covered call and collected a $112.30 premium for the right to sell 100 shares at $30 a share. This is below my basis, but I would not mind selling off part of my position and replacing it with a more stable company. If I lose the 100 shares I will still hold around 160 shares.


ESV Covered Call

Action: Sell to open
Description:  ESV JAN 15 2015 $30.00 CALL
Quantity: -1 contracts
Execution time: 06-08-2015 (today)
Price: $1.20
Total Proceeds $112.30 ($7.70 in commissions)


This increases my open premium total to around $415.00 plus I already closed a GE option trade that added an addional $181 dollars for a total of around $600.

Below are some other covered calls that are still open. I have actually earned quite a bit of the premiums as the strike price is quite a bit higher than the market prices right now. I may close out a couple or all of the positions soon. The reality is I don't want to sell any of the shares listed below. I guess I should have thought things through before selling the options to begin with. While I am earning premium money, which is cool, I don't like worrying about whether I am going to lose the shares. I keep bouncing back and forth with whether or not I want to continue doing these.

I guess I am greedy and want to collect the premiums and keep the shares. :-)



BBL Covered Call

Action: Sell to open
Description: BBL SEP 18 2015 55.00 CALL
Quantity*: -1 contracts
Execution time: 05-11-2015 10:19 ET
Price: $0.98
Total Commissions & Charges: $7.70
Total Transaction Amount: $90.30
Trade Settlement Date: 05-12-2015 

GM Covered Call

Action: Sell to open
Description: GM JAN 15 2016 40.00 CALL 
Quantity*: -1 contracts
Execution time: 04-27-2015 15:07 ET
Price: $0.98
Total Commissions & Charges: $7.70
Total Transaction Amount: $90.30
Trade Settlement Date: 04-28-2015


BP Covered Call

Action: Sell to open
Description: BP JAN 15 2016 47.00 CALL 
Quantity*:
-1 contracts
Execution time: 04-09-2015 11:35 ET
Price: $0.76
Total Commissions & Charges: $7.70
Total Transaction Amount: $68.30
Trade Settlement Date: 04-10-2015


VZ Covered Call

Action: Sell to open
Description: VZ JAN 15 2016 50.00 CALL 
Quantity*:
-1 contracts
Execution time: 04-09-2015 12:24 ET
Price: $1.75
Total Commissions & Charges: $7.70
Total Transaction Amount: $167.30
Trade Settlement Date: 04-10-2015

DEFY MEDIOCRITY

6 comments:

  1. Hey MDP,

    If the shares get called away you can always buy them back. Also when you buy them back you can initiate the order as a covered call where you buy the stock and sell the shares all at one time. It's likely that you will buy it back at a lower basis than what you were forced to sell at when/if the shares got called away.

    You could also keep a spreadsheet that keeps track of absolute basis for a particular stock. For me its all about basis reduction when selling premium against stock.

    Cheers!

    ReplyDelete
    Replies
    1. Dominic,

      Good points. I think I will continue with a strategy that is conservative, ie covered all way outside of the money and use the premium to supplement my dividend income. It would be nice to reach $20k in dividends and $4-5k in covered call premiums eventually.

      MDP

      Delete
  2. Hello,

    You have a conservative selling out of the money covered call options approach.
    I note that you paid a lot of commission.
    My brokerage charge me one $ and not the $ 7.70 you have to pay.
    If I had your selling call options, I could close those positions for 2$ and not the $ 15.40 you have to pay.

    Why should you think about a cheap brokerage account.

    For example:

    You have a selling covered call options and they have 20 days left before they expire.

    Quote $ 0.10 Why should I close the position? and by the way I have also to pay $ 7.70 in commissions and the sold call will expire within 20 days.

    Breaking news Toyota wants to buy GM. For $ 60.
    You have to deliver GM for $ 40 ( opportunity loss $ 2000 )

    With my brokerage account I can close ( buy to close ) the sold call option 20 day before expiration for $ 1.00.



    And did you see with your wife some of the YouTube video I sent you last night ?

    https://www.youtube.com/watch?v=Or7u3SLrA4c

    Warm regards,

    George T
    Netherlands

    ReplyDelete
    Replies
    1. George,

      Dominic from GenYFinanceGuy pointed out the high commissions as well. Considering I probably won't do to many option transactions, I probably will just pay the higher commission charges rather than opening a new brokerage account and building up positions again just to sell a few covered calls here and there.

      Thanks for the comment and stopping by. I haven't checked out the video yet, but I will soon!

      MDP

      Delete
  3. You shouldn't worry about losing shares if you sell calls. If calls are exercised, you retain all of the premiums. And, as pointed out above, you can immediately do another covered call on the same shares with a reduced cost basis.

    Selling calls on dividend paying stocks could lead to them being exercised just before the ex-dividend date, meaning you won't receive the dividend. If that happens late in the trading day, you may not have the opportunity to do the covered call trade. That's the potential drawback of this strategy. However, typically, the premium income makes up for that...

    ReplyDelete
    Replies
    1. Ferdi S,

      Thanks for the tips. I am still new to options hence the conservative strategy. I do like the idea of spicing things up a bit, but will most likely stick with covered calls here and there.

      MDP

      Delete