Selling AMD Covered Calls

Walmart shares bought and AMD Covered Call sold
AMD Advanced Micro Devices Fidelity ATP Trade Armor screen

I recently sold another covered call on my 100 shares of Advanced Micro Devices. Because AMD doesn’t pay a dividend, the only way to make money on this position is to either sell my shares or sell covered calls. Why not do both? In this case, I have done several AMD covered calls on my shares in the last couple of months. Each time they expired worthless to the person who bought my covered call. I get to keep the shares and the proceeds of the sales. That also means I can sell another covered call and repeat the process until someone gets the price right. I also get to keep the gain on the sale of my AMD shares. Thus far I have gathered $369.51 in additional profits from four covered calls.

Three Trades: AMD, PVG and WMT

It isn’t hard to understand the trading abbreviation for this transaction. In the image you can see 1.00 of -AMD200717C55 was FILLED @ $1.13. This means (before a small trading commission), the buyer of my covered call paid me $113 for the potential to buy my shares (1.00 equals 100 shares) if they close at or above $55 by July 17, 2020.

If that happens, I get to keep the $113 plus the proceeds from previous covered calls and will receive $5,500 for my 100 shares. Because I paid $47.66/share  ($4,766) for the shares, this results in a nice profit. I can then wait for the shares to fall in price and rebuy them if I want. This is a simple process, but don’t attempt it if you haven’t spent some time studying option trading.

Walmart and Rounding up

Walmart WMT is a good investment for long-term dividend growth

When I don’t buy online from Amazon, it is usually because I can find what I need at Walmart (WMT). For most purchases I check Amazon’s price first, then Walmart’s and Target’s. Amazon is my favorite for online purchases, but I don’t own Amazon stock because it is over-priced and doesn’t pay a dividend. Because I like to sell covered calls, I often buy small lots of a stock when the market is crazy so that I can have an even 100 or 200 shares to sell using that mechanism.

Because I owned 176 shares of WMT, and I like the recent news coming out regarding WMT, I bought another 24 shares so that I have a total of 200. This means I can sell two covered calls on these shares. I might not, and probably won’t, but I want to have that as another way to gather profits.

Covered Call on PVG Failed

You can also see that I attempted to sell a covered call on PVG. PVG is a small position and I was willing to take a profit on my shares. However, no one accepted my price yesterday, so the order expired. I do not enter covered calls for more than the day. If no one buys I want to reevaluate the buy the next day. I might be able to get a better price.

Remember the Risk Factors

Covered calls involve a small risk I am willing to accept. 1) One of the risks is that the stock will fall dramatically in value and I won’t be able to sell my shares because they are already committed to an order. 2) Another is that the price of the shares will skyrocket and I will miss out on the opportunity to make even more money from the sale of the shares at a higher price.