- Short expiration dates with high premiums
- Continue to sell calls even on stocks that are underwater
- Exit strategy for dividend paying stocks is to have them assigned.
Let's take a look at the stocks I bought so far and the income generated. I am not concentrating on growth companies or value companies. I am looking for stocks with vigorous calls. Although I expected to roll the calls quickly using expiration dates not far out. However, I have deviated even from that idea with at least one stock and that is call I sold on RIOT a very speculative block chain stock.
QCOM: Qualcomm
Qualcomm was the first stock I bought at $64.87. The $70 call on QCOM which paid me $1.25 will expire this Friday 3/16/2018. Based on how QCOM is trading with the news that their being acquired by Broadcom is dead QCOM is below my cost basis. Therefore, I expect the call to expire. I will immediately begin looking for another call next week.
QCOM has the advantage of providing a nice dividend. My cost basis is $ 63.12 when including the call premium and the dividend. I do not have an exit strategy on QCOM and I am hoping to work the calls to yield significant income.
NUE: Nucor
I invested a lot of money in Nucor: 400 shares at $66.60. I sold a February $70 call and received $1.35. The call expired and I immediately sold a $72.50 call on all shares with an expiration date of April 20, 2018. Like QCOM, Nucor pays a dividend which I should get provided my shares are not called away prior to 3/28/2018. My cost basis is now $63.82.
Again, I do not have an exit strategy on NUE, I will continue to sell near the money calls with short duration expirations and high premiums.
RIOT: Riot Blockchain
RIOT is a total departure from my typical strategy. I bought this stock at $21.08. My first call yielded quite a nice income of over 10%. But the stock has crashed and burned. My first call expired and I immediately sold another call but had to go out to June to get a decent premium of $1.00. Right now my cost basis is $21.08 less the income of $3.25 or $17.83.
RIOT could go belly up by then, it could also easily go up enough that my stock is assigned at $12.00 and I would have lost $5.83 or 32.679%. My exit strategy is to have this stock assigned or have it go belly up.
AAPL: Apple
And then I invested in AAPL at $176.98. My first call for a strike price of $195 expires on April 20, 2018. I received a call premium of $2.25 and the dividend of $.63 making my basis $174.15. Today Apple is trading at about $181.30 so I am in the money but not yet at risk of having my shares called away. AAPL's all time high is $183.50.
Like every stock that pays a dividend, my exit strategy is to have this stock called away at some point while I sell calls as often as I can at the highest premium possible.
TWTR: Twitter
This trade is more emblematic of what I want to do in this account. I bought TWTR at $25.91 and sold a call with an expiration of just 4 days away. I received $1.15 for the call. It was exercised at $27. My income on this stock is 8.64% in just four days.
Twitter is also an example of how selling covered calls limits upside potential. Today TWTR is trading at $34.185. You could buy TWTR today and sell a call 31 days out (4/13/2018) at a strike of $36 for a premium of $1.10. Not as compelling as the four day call.
I am going to bank my money from Twitter and use it to fund my next buy.
GILD: Gilead
And that next buy was Gilead at $79.99. I sold a May $87.50 call for $1.10 and I should receive the dividend of $.57. Like the other dividend stocks, I do not have an exit strategy other than having this stock called away.
Gilead's high is $123.37 and I just may have my shares assigned. If so I make 11.72% in a very short time frame. If my call expires, I will continue to sell calls.
The Table below presents all the information on these trades.
I currently have $62,822 working and my yield so far this year is 4.51%. As with all my portfolios, I will report on the results no matter what the outcome. I write up these ideas so I can learn, as I hope my readers learn, what works and what does not.
M* MoneyMadam
Long: all stocks in the table with calls.
