GM option trades

I made a couple of GM options trades recently.

First, a couple of days ago, I closed my Jan 2015 $40 covered call which gave me a net profit of $64.60.



Next I wrote a $37 Jan 20 2017 covered call this morning that is shown below. If I hold on to the option until maturity I will earn $273.55. So far I have not held any options to maturity. I also still have open covered calls in BP, BBL, and now GM again. These can be found on my Options tab above.

To lose the shares, GM would most likely have to trade above $38.50. I have no problem losing the shares in that price range. Also if I don't lose the shares, the 200 shares will pay $432.00 in dividends over the next 6 quarters. Including the option premium, I could potentially receive $705.55 in total income from GM over the next six quarters.. That sounds pretty good to me!!!

If the share price drops considerably from the current $31 level, I will close the option early and realize whatever percentage of the option that I have earned.

Hopefully I have explained everything accurately.


Action: Sell to open
Description: GM JAN 20 2017 37.00 CALL
Quantity*: -2 contracts
Execution time: 07-10-2015 10:04 ET
Price: $1.41
Total Commissions & Charges: $8.45
Total Transaction Amount: $273.55
Trade Settlement Date: 07-13-2015         


So far in 2015 I have earned $385.90 on the four completed options trades.

DEFY MEDIOCRITY

VZ option closed

Yesterday I decided to close my VZ covered call.

As you can see from the photo above (actually not the greatest quality) I was able to pick up $86.60 from the transaction.

Just for comparison purposes I will receive about a $75 quarterly dividend in August from Verizon. This option remained opened for about 2 months.

Total option premiums earned (closed transactions) so far in 2015 are $321.30. I am certainly pleased with the results so far especially since my first options trade was in April. Another $300 in premiums this year will offset the $600 dividend income loss from ESV. That would be a big win!!!

I also should note that I still have 3 open call options in BP, GM, and BBL. If I hold those to maturity I have the potential to earn an additional $250.00.

I guess I probably should work on an Options Page pretty soon.

DEFY MEDIOCRITY

ESV Option closed --- With Pictures

Eleven days ago I sold 1 ESV covered call and received a $112.30 premium after fees.  Today I went ahead and closed the position which cost me $58.70 after fees. Essentially I have earned 50% of the premium in under two weeks. Not too bad!!

So I ended making a net of $53.60 for less than two weeks of work.

I also received my quarterly dividend from ESV today in the amount of $39.72.


Comparison

• ESV Covered Call (11 days) --- $53.60
• ESV Dividend (90 days) --- $39.72
• Total ESV Income --- $93.32

I'm also excited about posting my first ever photos from my phone.

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

BBL Covered Call

Today I sold a covered BBL call. The summary of the trade is copied and pasted below.


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 

I should receive a September BBL dividend for about $205 (assuming I still own all of my shares). With the share price hovering around $48, I think this is a pretty solid short term options trade. If I retain the shares, this is a nice way to add 44% to my BBL dividend income in September.


Here are some other covered calls that are still open.

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

Options trade: GM

Today I sold the following covered call in General Motors

• 1 Sell GM Jan 15 2016 $40 Call (Open) --- $.98 --- Net proceeds --- $90.30

Unlike my first experiment with GE (deep in the money call) I took a much more conservative approach this time. Currently GM is trading around $35.75 as I type so a lot of price appreciation would have to occur to lose these shares. Quite honestly it wouldn't bother me to lose them at $40.

At first glance the premium of $90.30 doesn't seem overly impressive by itself.  However, when you consider 100 shares of GM currently pays $144.00 (yearly) after its recent dividend raise the combination of the two is actually very nice.

Going forward these are the types of option trades that I plan on making. Lower risk plays that will give my yearly income a boost.

DEFY MEDIOCRITY

First Options Experience with GE

I can honestly say that I have never been interested in trading options. For one thing I never really understood them and secondly it seems more like a gamble than an investment strategy.

There are numerous bloggers that not only invest in dividend paying companies, but sprinkle in a few options here and there as well.

What seems to be most prevalent is to sell calls on stocks that are currently owned or sell puts on companies that would like to be acquired.

One of the owners of the company I work for has many different options in companies like AAPL, BIDU, and GOOG. He has been encouraging me to jump into options but I really didn't feel comfortable since my main investment strategy is to accumulate stocks that will provide an income for my future life. To me, these two strategies always appeared to be in conflict with each other.

I eventually asked him to look up some of the premiums on companies like T, KO, RDS-B, and a few others. After watching more than a few transactions over the year from different bloggers, I decided to start off in the shallow end of the pool using a cover call strategy.

Two weeks ago when GE spiked after the news of  Jeff Inmelt's plan to reduce GE Capital I decided to sell a covered call. The price was trading in the $27-$28 range at the time. The usual transaction people would make is to find a date sometime in the future and a price that is high than the current trading price. A premium amount would be set based on the time and price requested. Since GE was at the high end of its multi year range, I felt like it might drift back down.

I should have set a strike price in the $30s in Jan 2016, but I did not do this. Instead I did something totally stupid and sold an in the money call which has been bothering me ever since.

Here are the transactions that took place.

• 4/10/2015 --- SELL GE SEP 18 2015 CALL (OPEN) ---2 @ $5.89 --- Proceeds --- $1169.55

So essentially I was paid a premium of $1,169.55 to sell 200 of my GE shares for $22. Immediately after I opened this trade Sharebuilder showed the Option at the bottom of my screen with ITM.



I have been watching this option every day for the last two weeks and every day it said I had a loss of $1300.

Between the ITM (in the money) icon and the fact that my option value never changed values, I thought that I screwed something up and had my shares called away. Shares of GE actually traded above $28.50 so this just reinforced my original thoughts that I had lost my 200 shares @ $22.00 and received the $5.89 premium less commissions.

I actually felt pretty stupid and kept waiting for my shares to disappear. Each day for the next couple of days I would check my Sharebuilder account expecting to see my shares disappear. They didn't so I would then check the option value and it continued to remain unchanged at $1300.

This actually created some confusion because GEs shares had started falling and were in the $26 range. I kept thinking if I haven't lost my shares when it was trading above $28.50, why am I still showing a $1300 unrealized loss when GE's price keeps dropping.

Finally I decided to click the button that says Close just to see what would happen. Again I wasn't certain whether I still owned my shares or not. I did this on Tuesday when the shares were trading around $26.50.

What popped up next was an estimated amount needed to close the account. It said I didn't have enough cash to make the transaction. Yes I used the premium to buy other stocks. I should have not done this. Apparently I can't transfer funds from my bank to close options like I can when I make weekly investments. The good news is that it said I needed $990 to complete the transaction. At least I knew that I still owned the shares.

I guess it's good that I tried to close the option because now I know to keep some funds available if I ever need to close out future options. I set up a transfer so I could try again. Anyway today just before close the thought of always being in the money bothered me too much so I closed out the position just to get it off of my mind.

• 4/24/2015 --- BUY GE SEP 18 2015 CALL (CLOSE) --- 2 @ $4.90 --- Cost --- $988.45

As I listed above, I had to pay $988.45 after commission to close the account and I originally received $1169.55 so I pocketed $181.10 for my 14 day experiment.

To put this in perspective I will be receiving around $99 in dividends on Monday from my 400+ shares of GE. This 2 week experiment netted me almost twice that amount on just 2 options or 200 shares.

Going forward I am going to continue developing a strategy that includes options along with my regular investments. While I haven't posted about it, I actually have Jan 2015 calls on BP@ $48 and VZ at $50.

I guess the summary of my experiment is be careful because you can EASILY lose shares you own and EASILY buy shares of a company you might not want to own. The one thing I am happy about is that I am keeping all of my GE shares. Seeing that option premium in relation to the dividends I will receive is pretty powerful to say the least.

Anyway that is my first experience with options and it was a learning experience for sure. While Shareholder is great in my opinion for buying stocks, I don't think it is the best option (no pun intended) for trading options.

DEFY MEDIOCRITY