Monday, November 6, 2017

Broadcom bid for QCOM provides for big call

On Friday, news of the potential buyout of Qualcomm by Broadcom broke.  I noticed a January 19, 2018 call that intrigued me.

I own quite a bit of QCOM mostly for the dividend and for the calls.  I have written many posts about QCOM calls.  I am an experienced seller of covered calls but here is one that really surprised me.

After hours, QCOM was trading between $61 and $64.  I saw a call with a $65 strike and the call premium was $4.00.

I put in an order for today, Monday November 6 to sell this call.  I actually did not think it would execute but it did.  At this point (11:00 AM Eastern time) that very call is trading at $1.80.

This experience is a first for me.  I rarely put in orders for the next trading day, but this time it worked out well.  Instead of $1.80 I received $4.00.

Notice the call expiration is after the next ex-dividend date of November 28 and based on the trading price of $62.92, I just may keep this lot through the ex-dividend date.  The table below shows the details of this trade.

The lot I used for this call, I bought a year ago September.  September 2016 QCOM post I have sold several calls on this lot as I suffered through stock price declines slipping into the high $40's.  I do love the dividend yield but I am willing to lose this lot should my stock be called away.

M* MoneyMadam
Disclosure:  Long QCOM with Calls