While my profit for May was small, I’m satisfied with where my investments currently stand. The strategy for my options was staying afloat with under water positions by decreasing their cost basis, and I believe that’s going well.
So what’s coming up for writing covered calls this month? I’ll detail my strategy and all the covered calls I’ve written for the June 18th expiration next!
Strategies For Writing Covered Call Options
While most of the stocks I’m holding for my covered call strategy have come off their recent lows, no one knows if another significant drop is coming soon. So I’ll continue to sell calls that help protect from further downside in the market.
However, it appeared that buyers were looking at a 50%-60% sale on quality growth stocks as an opportunity to start or add to a position. So if the market continues going up, I want to try to capture as much profit as I can.
I plan on doing this by rolling up to higher strike prices or to the next month if it makes sense by the numbers to do so. This will require me to set alerts and check the market every day for opportunities.
I rolled 2 options on expiration day, the 21st, before the closing bell–LMND and SFIX. The premiums were a bit higher because they were still a month out, and there wasn’t a risk of a severe price drop by events over the weekend.
What I’m hoping is that this strategy will make more money in the long run with stocks that are close to their strike price on expiration day or stocks that I feel have a lot of potential to continue upward.
If a stock is close to the strike price, but won’t be exercised, rolling to the next month should give me a better premium than waiting until that month becomes the current platform.
If a stock has gone past the strike price, I’ll hopefully capture more of that upside by rolling to a higher price.
Making sure that the difference between the premium I’ll have to pay to close out my original option isn’t too high will be paramount to achieving good results.
So with all of this in mind, here are the covered call options I wrote this month!
New Covered Call Options
All the options were written for the June 18th expiration as follows:
Airbnb (ABNB)
I added to my position with the purchase of 100 shares at $137.28 per share. The original shares had a cost basis of $165.02, and that price was too far out to get a good premium.
So I sold 1 contract on the lower priced shares for $6.13 per share on the $140 strike price, for a premium of $613 before fees.
After a few days, the price had risen, so I rolled this option to the $145 strike price. It cost $4.20 per share to close the $140 contract, and I sold the next one for $4.85 per share.
This resulted in lowering my cost basis to $135.36 per share and will net an extra $5 per share in profit if the option is exercised.
Lemonade (LMND)
My position in LMND consists of 500 shares. I wrote 2 calls on the lower priced shares on the $85 strike price at $9.77 per share. The premium received was $1.954 before fees.
I didn’t write a call on the other 300 shares because they were too far off from the current price.
Square (SQ)
My position is SQ is 100 shares, and I sold 1 contract at the $240 strike price for $4.10 per share. This gave me $410 in premium before fees.
Appian (APPN)
My APPN investment wasn’t looking too good. I had 100 shares at a cost basis of $165.68, and it was too high for a decent option at this point.
The second 100 shares were better with a cost basis of $125.42. But APPN had dropped considerably, and I felt the only way to mitigate more losses was to purchase another 100 shares, which I got at $82.80 per share.
I wrote a call on the $85 strike price at a premium of $5.36 per share for $536. This stock has been pummeled recently, but I believe the selloff has been overdone due to the company’s potential.
Fastly (FSLY)
The 200 shares of FSLY in my portfolio has a cost basis of $84.89, much higher than where the stock has been trading. So I didn’t sell any options on those shares.
I added to my position by purchasing 200 additional shares at $45.90 per share, and wrote 2 call options at the $47 strike price for $2.47. This gave me a premium of $494 before fees.
Skillz (SKLZ)
My position in SKLZ consists of 800 shares. I had sold 4 contracts for the June 18th expiration last month on the $15 strike price. With the stock price rising, I rolled that option to the $16 strike price.
I bought back the original option for $1.75 per share and sold the new option for $1.29. This will enable me to gain a little more profit overall while still having a lower cost basis if the option is not exercised.
If the stock rises, I will continue to look for an opportunity to write an option on the other 400 shares.
Stitch Fix (SFIX)
The 300 shares of SFIX have a cost basis of $46.44 per share. I sold 3 calls at the $49 strike price for $4.09 per share resulting in a premium of $1,227 before fees.
Village Farms International (VFF)
I added 300 shares of VFF to the 700 already in my portfolio. This brought my cost basis down to $9.54 per share.
So I was able to sell 10 option contracts at $.60 per share for $600. This will allow me to break even on VFF, but if the stock rises, I’ll be looking to roll to a higher strike price.
Pinterest (PINS)
I decided to buy an additional 100 shares of PINS, which brought me to 400 shares total with a cost basis of $65.81 per share.
This enabled me to sell 4 call options on the $65 strike price at $2.00 per share for $800. I’ll have a profit of just under $500 if they’re exercised, and be in good shape with my cost basis of they’re not.
Zscaler (ZS)
I purchased 100 shares of ZS for $174.92 per share. This is a quality cybersecurity company, which has a bright future as long as organizations need protection online–and that will be always!
The call option I was able to sell was for the $185 strike price with a $13.95 per share premium for $1,395. I’m excited about this particular trade because I was able to get shares at a good price and a high potential option.
OK, so those are the options I wrote in May for the June 18th expiration. If I make changes or add new options, I’ll be sure to update you!
Potential Monthly Profit
The last couple of months I haven’t talked about potential profit. This was because nearly all of my options were written to try to break even on all the positions that were well below what I purchased them for.
If the market starts falling, that will be the case again. If it goes up, I’m in a good position to earn a couple thousand dollars or more in profit.
The amount will depend upon how far and fast a stock goes up. In-the-money options are much more expensive, and it will be difficult to roll them profitably if the stock jumps substantially higher fast.
So I’ll need to keep a tight eye on my positions relative to their option prices and seize any opportunities I can.
What do you think of the option trades I made this month? Do you think there’s potential for profit or do you think the tech sector will continue it’s downward spiral? Let me know in the comments below!
Option Updates
June 3, 2021:
Fiverr (FVRR)
I sold 1 call option for FVRR at the $230 strike price for $8 per share for $800. This option is for the July 16th expiration and will result in a substantial loss if exercised since my cost basis is $260.96 per share.
However, I’m hopeful that I’ll be able to take advantage of any potential price increases by rolling the option to a higher strike price.
Airbnb (ABNB)
I sold 1 call option at the $160 strike price for $2.42 per share for $242. If this option is exercised, the other ABNB option will have been also, resulting in a break even result for this stock.
Appian (APPN)
I rolled the $85 call option to the $95 strike price. The first call was closed paying a $5.74 premium per share, and the second was sold at $3.51 per share.
With the potential profit, it enabled me to sell another call option at the $105 strike price for $1.50 per share. This would result in breaking even on APPN.
Zscaler (ZS)
I rolled ZS from the $185 strike price to $190. The cost was $9.25 per share to close the first option, and I received $6.40 per share for the second one. I believe that selling the original covered call on the May expiration date gave me the extra premium to make this roll profitable.
June 8, 2021:
Lemonade (LMND)
With LMND trending up, I wanted to get more from this stock. With my cost basis at $79 for 200 shares, I could increase my profit by about $1,000 by rolling from the $85 to the $100 strike price. I closed the first option at a premium of $14.13 per share and sold the new one for $4.15 per share.
Overall, this probably wasn’t the best roll to make. With the stock price trending up, there was an excellent chance that the $85 option would’ve been exercised with a profit of just over $3,000. If the stock price went back down, my cost basis would’ve been about $70 per share and the ability to sell another great call.
I believe in the company and feel confident that the stock price will go higher. But that’s longer term thinking, and LMND was bought with the intention of making a profit with covered calls. The investor side of me still wants to come out and get all the upside I can!
The increase in price also gave me the opportunity to sell a call on my remaining 300 shares that have a cost basis of $127.06. I wrote a call on the $115 strike price for $1.05 per share for $315. If the option is exercised, the profit from the other call will be enough to cover the loss and give me a profit of about $500.
Innovative Industrial Properties (IIPR)
I sold a covered call on my 100 shares of IIPR on the $195 strike price at $2.31 for $231. The cost basis of this position is $192.29 per share.
Zscaler (ZS)
With the number of high profile hacks in the news, cybersecurity stocks like ZS have been climbing. So I was able to roll my call from the $190 strike price to $195.
The $190 call was closed out at nearly the price I sold it for, $6.75 per share, and the new one was sold for $3.96 per share for $396. If the call is exercised, my profit will be about $2,800.
Fiverr (FVRR)
I was able to roll the $230 FVRR option to the $240 strike price. The cost to close the original option was $7.68 per share, just under the premium received. So selling a new call at a strike price $10 higher and getting another $5.23 per share premium was great!
Appian (APPN)
I have 2 separate calls on APPN. The shares with a cost basis of $125.42 per share had a $105 call option that I rolled to $115.
It cost $4 to close the first option, and I received a premium of $1.52 to sell the second one. If this option is exercised, both of them will have been, resulting in a small profit of about $100.
The original shares of APPN that would be left still have a cost basis of $165.68. So I will still have some work to do there!
Bandwidth (BAND)
My 200 shares of BAND have been under water since I bought them, and there has been very few opportunities to sell decent covered calls. So I looked to July 16th options and sold 2 contracts on the $130 strike price at $3.70 per share for $740.
The stock price has been recovering slowly, so my hope is that I’ll be able to roll the options to a higher strike price if it continues to climb.
Village Farms International (VFF)
I rolled the 10 contracts sold on the June $9 strike price to the July $12 call. The original options were closed for $1.02 per share, and the July options were sold for $.60 per share. If the options are not exercised, I have still lowered my cost basis by about $200.
June 17, 2021
Bandwidth (BAND)
I rolled the July $130 option to the $135 strike price on June 7th. The cost to close the first call was $4.55 per share, and the premium for selling the second one was $3.14 per share.
On the 17th I took the opportunity to roll this option to the $140 strike price. Closing the $135 call cost $5.12 per share, and I received $3.30 for the new option.
Skillz (SKLZ)
The $20.5 call was rolled to the $22 strike price at a cost of $1.60 per share. The new call option gave me a new premium of $.94 per share.
