February was a great month for covered calls, and all but 2 of my options were exercised thanks to the continuation of the up trending market.
A couple of my choices didn’t turn out as well as I’d hoped for a couple stocks I’ve been holding from last month. But, over all, I’m pleased with the results of my February 19 calls.
Let’s see the results and the new options sold for March!
Results From Call Expiration
I had 3 stock positions that were not exercised last month and bought 5 more this month. So I had a total of 8 stocks that I sold covered calls for, all with the March 19 expiration date.
Here are the results of those option trades:
Crowdstrike (CRWD)
With 100 shares of CRWD I sold 1 contract at the strike price of $220 for $12.72 per share for a premium of $1,272.
The option was exercised, and with a cost basis of $21,792.04, my total profit on this contract was $1,478.75 after fees.
Fiverr (FVRR)
My position in FVRR was 200 shares, and the 2 covered calls sold were at the strike price of $240. The premium received was $24.63 per share for $4,926.
This option was also exercised, so the profit on this stock with my cost basis of $47,812 was a total of $5,111.45.
Lemonade (LMND)
I had purchased 300 shares of LMND and sold 3 contracts at the $141 strike price. The $16.30 per share premium brought in $4,890.
The option was exercised, and after subtracting fees and my cost basis of $42,273.99, the total profit from LMND was $4,912.90.
Square (SQ)
After not being exercised last month, the new cost basis of my 100 shares in SQ was $21,397.72. I was able to sell another covered call at the same strike price of $230 for a premium of $12.06 per share for $1,206.
This month, the SQ option was exercised, and the total profit after fees was $2,807.05.
Pinterest (PINS)
My position in PINS was 400 shares, and 4 contracts were sold at the $73 strike price. The premium I received was $6.58 per share for $2,632.
The option was exercised, and after fees and my cost basis of $28,288, the profit from PINS was $3,540.55.
Sareptha (SRPT)
SRPT was a stock that dropped approximately 50% from my purchase price due to poor results from one of its drugs. As I stated last month, I don’t expect the price to rebound significantly.
So the plan for this 200 share position was to try to minimize my losses as much as possible. To that end, I sold 2 contracts with a strike price of $95 at a premium of $7.73 per share for $1,546.
The option was not exercised, and the stock price has not significantly moved in either direction. So I will continue my strategy with a new cost basis of $29,042.86.
Fastly (FSLY)
The covered calls on FSLY were not exercised last month, so the new cost basis for my 200 shares is $18,886.42.
I sold 2 contracts at the $92.50 strike price at $10.17 per share for $2,034. If exercised, this option would’ve resulted in a profit of approximately $600.
However, shortly after selling the covered calls, the stock price started rising. After running the numbers, I saw there was a much bigger profit potential by rolling my call option to a higher price.
I rolled the option to the $102 strike price, however, the price dropped back some, and the option was not exercised. I was still able to lower my cost basis for FSLY by $1,009.73 to $17,876.69.
Bandwidth (BAND)
I purchased 100 shares of BAND and sold a contract for the $165 strike price. The premium I received was $11.97 per share for $1,197.
The option was exercised, and after fees and my cost basis of $16, 357, the total BAND profit was $1,338.61.
The total profit for February, not taking into account the cost of stocks that were not called away, was $21,743.63. Adding that amount to January’s profit, and I have a cumulative gain of $34,234.85.
Trading Notes And Strategy Changes
The first note that I want to discuss is my cumulative profit number. It is not true profit due to outstanding positions in 2 stocks.
I have probable losses of at least $10,000 or more in SRPT, and a possible loss in FSLY. Dealing with inevitable losses and learning how to minimize them is part of my process.
While the market could go my way and lessen the amount of money I lose, I need to always be realistic. That being said, I’m happy with the results of my covered call trading so far.
The other note I want to make this month is about the volatility of the stocks I’ve been purchasing. I’m getting maximum premiums up to and over 10% of my position.
My dilemma this month is deciding if I should decrease my exposure to some of these higher volatility tech stocks. Some of them are hitting new highs and pullbacks are inevitable.
What I’ve decided is that I’ll limit my purchases to just 100 shares for most of the stocks, and will only buy if I determine that the price is a decent entry point if I need to hold it longer term.
With that said, let’s take a look at the covered call options I’ve sold for March!
New Covered Call Options For March
Every one of the call options I’ve sold are for the expiration date of March 19th. Here are the updates and all the options I’ve written:
Sareptha (SRPT) and Fastly (FSLY)
With the market pulling back, I’ve decided not to sell a call option on either of these stocks. I have a lot of confidence in FSLY and will look for an opportunity to sell an option with a strike price high enough to at least break even.
The price of SRPT has stabilized somewhat, and I am hopeful that I can sell another call at or near the $95 strike price again. I’ll be checking daily for opportunities and will update this post if I sell calls for either of these stocks,
Airbnb (ABNB)
Airbnb is an online travel platform, and it’s stock debuted in late 2020. Maybe it’s just wishful thinking, but I believe that travel is going to be a great industry to invest in now that the world is on the road to being Covid vaccinated.
While the stock wasn’t too far from it’s high of about $220, I feel OK with my entry price of $200.35 for 100 shares. I sold a covered call with the strike price of $202.50 at a premium of $14.60 per share for $1,460.
This premium represents 7.29% of my position in ABNB.
Lemonade (LMND)
This is the third month I’m buying shares of LMND for my covered call strategy. It’s pulled back from the high of $188 to about where we bought this stock last month.
So I repurchased 300 shares again for $142 and wrote a call option for the strike price of $143. The premium of $14.95 for $4,485 represents 10.5% of my investment in LMND.
Crowdstrike (CRWD)
CRWD is another stock from last month that has risen some but pulled back from it’s $251 high. I purchased 100 shares at $231.66 each and sold a covered call option for $235.
The premium I received was $14 per share for $1,400 and represents 6.04% of my investment.
Innovative Industrial Properties (IIPR)
IIPR is a real estate investment trust, REIT, and I’ve owned it as part of my dividend portfolio for a while now. They specialize in leasing properties set up for marijuana businesses and have been growing fast.
I purchased 100 shares for my covered call strategy at $214.50 and sold an option at the $220 strike price for $10.90 per share. The $1,090 represents 5.1% of my IIPR position.
Because I’ve done so well with this stock in my dividend portfolio, I chose a higher strike price than normal, which reduced my premium. In hindsight, this was a mistake I think. I can’t get attached to stocks in this part of my portfolio!
Square (SQ)
Square is another stock that I’ve got a lot of confidence in, and I believe that as retail and self-employed individuals start opening up more, it’s going to do well.
It’s not too far from it’s high of $283, but I bought 100 shares at $272.75 each based on my belief in its fundamentals. The option contract gave me a premium of $17.55 per share for $1,755.
This premium represents 6.43% of my SQ position.
Appian (APPN)
APPN’s stock price was near it’s $236 high last month, so I didn’t buy it then. But after pulling back some, I purchased 100 shares at $197.50 each.
I sold a call option with a $200 strike price for $15.20 per share. The $1,520 premium represents 7.7% of my APPN position.
Fiverr (FVRR)
FVRR has had a huge run up, and I didn’t think that I would include it this month. However, I really believe in this company since I’ve used it’s services.
It had pulled back over 10% from it’s high of $336, so I made the decision to buy 100 shares for $293 each. I think it’s the riskiest of my purchases this month, but I’m willing to hold the stock if the position goes against me.
I sold a call option with the strike price of $300 for $21.80 per share. The $2,180 represents 7.4% of my position.
Bandwidth (BAND)
BAND is another stock from last month that has pulled back some from it’s high of $196. While it wasn’t as low as I would’ve liked, I made the decision to buy it again.
I bought 200 shares at $182 per share and wrote 2 call options with a strike price of $185. The premium received was $13.60 per share for $2,720, which is 7.5% of my position.
As a side note, after I purchased 200 shares of this stock, I realized that I forgot to put Pinterest (PINS) on my list! I had to stay true to my rule of no more than 50% of my portfolio for my covered call strategy, so I didn’t purchase any.
I think I’m going to make a new rule that I don’t make my trades with 3 dogs and a grandson running around!
Potential Monthly Profit
My potential profit for March is about $16,600+ if all the options were to be exercised. As I write this, the NASDAQ has been falling, so my positivity about the tech sector may be completely wrong–the stock market will let me know!
What are your thoughts? Should I have stepped back from the tech stocks listed above and been more conservative? I’d love to hear your comments below!
Option Updates:
Due to the pullback in the NASDAQ, I’ve reevaluated my holdings, specifically SRPT. This drug maker fell due to disappointing results with one of it’s products awhile ago, and it’s not likely to rebound any time soon. My strategy with this stock has been to continue to write call options and minimize my loss as long as I can.
However, I don’t think that continuing to hold this stock is the best way to utilize my funds. I only want to own stocks that I have confidence in, that have the fundamentals for future growth. With that in mind, I sold my 200 shares, which resulted in a realized loss of $12,186.95 after fees (ouch!).
With those funds I made 2 purchases on March 9th:
Pinterest (PINS)
I bought 200 shares of PINS for $66.02, then sold 2 covered calls for the March 19 expiration date at $1.93 per share for $384.62 after fees. While the premium I received is lower than my target percentage, the strike price of $70 per share would result in a nice profit in 10 days.
If the option is not exercised, I’ve got shares of PINS at a great price and am happy to hold them if the market continues downward.
SKILLZ (SKLZ)
SKLZ is an innovative platform that connects gamers and app developers, and I think it has huge potential. So I purchased 200 shares for $24.89 per share, which is a good pullback from it’s recent high of $46.29.
I sold 2 March 19 calls at $3.06 per share with the strike price of $25 for $613. This represents 12.3% of my total SKLZ investment. Again, if the option is not exercised, I’m very satisfied to hold the shares in my portfolio if the price falls further.
Making the decision to take the loss on SRPT wasn’t an easy one, and it may not even prove out to be the right one. But for me, having those investment dollars tied up in a stock that I no longer had confidence in didn’t make sense when other investments presented a much more compelling opportunity.
