The Last Three Weeks

Although I have continued to trade options each week, I don’t believe I have given any updates about my covered call or cash covered put options trades. The following images show the trades I completed for weeks 27, 28, and 29. Some weeks have more opportunities for covered calls, and other weeks seem to lend themselves to cash covered put trading. That was certainly the case for week 29, where my put trades were more profitable than the cash covered calls, with the exception of FLGT. Flugent Genetics seems to be on a tear upwards lately, and if my covered call sells at $95 per share I will book an excellent profit. ETN covered calls are also a great income tool for my Eaton shares.

Status of the Options Trading Class

I still hope to create and provide some online Zoom training in options and five of my blog readers have expressed interest. I kept their names handy, so that I can invite them to the class(es). However, I have not spent time on developing the class this summer, as I have been busy. Our lead pastor has been on sabbatical, so I spent quite a bit of time preparing two sermons. I am also continuing to teach a series on the book of Proverbs, and my preparation time for that is a priority over developing a class in options trading.

Covered Calls on a New Position

As a quick refresher, a covered call sale is an options contract for 100 of my shares in any position where options are available. Bear in mind that there are thinly-traded stocks that are not in the options universe. I always check to see if I can buy a position using an options contract as one of the criteria I might want to consider when buying a new investment. For example, this past week I purchased 100 shares of CAG (Conagra Brands, Inc.) as a long-term investment. However, if I can get both some dividends and some covered call income in the next several months, I will take it.

CAG is not a growth investment. Therefore, I bought the shares as more of an income play based on CAG’s good dividend payout ratio and recent dividend increases. I am also keeping an eye on the Ex-dividend date for CAG: 08/02/21. Any covered calls I might sell must take the $0.3125 dividend into account. I don’t want covered call income that is less than the dividend.

Also note that CAG’s price performance for the last 52 weeks is negative (-6.45%). That made me more interested in CAG, as a good earnings report could propel the shares higher. CAG is scheduled to report Q1 earnings at the end of September.

Options Trading Strategies

Before submitting your options trading agreement with Fidelity, make sure that your risk profile is set to “Most Aggressive” for the account or accounts in which you desire to trade options.  You need to submit a separate agreement for each account, e.g. IRA, Brokerage, ROTH.

My Strategy as of July 12, 2021:

The first one is the one I do most of the time, the second (Cash Covered Puts) is next in frequency, and the third is one that I do perhaps once per month.

1. COVERED CALLS: If I have a position that has grown significantly in value, and that I either want to sell, or lighten up a bit on, I sell covered calls. For example, I own some very profitable shares of ETN, and I have repeatedly sold covered calls on those shares. YTD I have received over $1,300 in this position using this strategy. 100 of my original 500 shares have been called away. There is one covered call pending for another 100 shares.

2. CASH COVERED PUTS: If I would like to buy a position, I always enter limit orders. But lately I have been selling cash covered puts to grab some cash and potentially get the shares at a price that I think would be appropriate. YTD I have received over $3K for this, and, unfortunately, I rarely get the positions. On the other hand, that lets me try again if I still have interest. My average income for all of these trades is about $66. I consider that a fair return on 5 minutes of my time.

3. The third tactic is to buy 100 shares of a company where the stock price is rising or if I think it is undervalued at the present time. shortly after the buy, I look for an opportunity to sell a covered call to sell the shares at a specific contract price. That way I get the income from the covered call and from the gain on the sale of the investment. If I am patient, I might also get a nice dividend.

Covered Call and Put Options Trading Links