What Should You Think and Do?

In 2024 I had a total of 725 options contracts expire. That means I kept the income from the contracts, and I kept the 72,500 shares of stocks or ETFs that were covered by the covered call options contracts. During 2024 I also had forty assigned contracts, which means 4,000 shares were called. To put that in perspective, only 5.5% of my shares were called.

What Does a Call Mean?

A covered call option is called when the buyer of the call option exercises their right to purchase the underlying stock at the agreed price. This typically happens if the price of the shares is above the contract date on the date the contract expires. So, for example, if the share price this Friday is $40, and the contract price was $38, then the buyer of my call option will “call” for my shares, and I have to sell them. That is the contractual agreement.

However, sometimes if the stock price rises above the strike price before the option’s expiration date, the contract buyer can buy your shares and “call” for them before the expiration date. In my experience that is fairly rare. However, it did happen to me this past week.

2025 Track Record for Assigned Contracts

On August 20, 2025, Cindie’s investment of 100 shares of MFC (Manulife Financial Corporation) were called at the contract price of $29 per share. The shares would be worth $30.74 per share as of Friday’s close, so the buyer of the contract is happy. However, Cindie received the $2,900 for her shares as agreed.

The reasons the shares were called before the contract expired (09/19/25) were twofold. The first is that the buyer can make a quick profit because their cost basis for the shares was $29. The second is that the ex-Dividend date for the dividend was August 20, so they also will get the dividend and Cindie does not.

Four Reasons this was a Good Thing!

This is not entirely bad from my perspective. First of all, the current forward dividend yield of MFC is 4.19%. The dividend is paid quarterly. The cash is now in the money market account. The yield on SPAXX is close to the yield on MFC. We aren’t losing much income and the income will now be monthly instead of quarterly for the $2,900 in cash.

Secondly, we made a good profit on the shares. She bought the shares in 2021 for $19.52/share and sold them for $29.00 per share. That is a profit of $948. During the time she owned the shares she received $455.63 in dividend income. In addition, during the last twelve months Cindie received $128.60 in options contract income. That brings her total profit to $1,532.23. That is an excellent ROI.

Thirdly, this $2,900 will be useful for fulfilling Cindie’s 2026 RMD. It is a good idea to have cash available for the RMD so that you don’t have to panic sell an investment to raise cash to satisfy the RMD requirements.

Finally, we still own shares of MFC. I own 1,000 shares of MFC in my ROTH IRA with an open covered call contract priced at $32. I also own 1,100 shares of MFC in my traditional IRA with an open covered call contract priced at $34. Cindie also owns 100 shares in her ROTH IRA with an open covered call contract price of $31. I won’t be rolling those shares up to a higher price because there are no good contracts available. However, she will continue to receive the dividends until her shares are called and after that if the contract expires worthless.

Global Ship Lease Inc Shares Called

I also had seventeen covered call contracts on GSL. That means for 2025 we have had a total of eighteen contracts called. However, during the first eight months of this year we also had 1,307 contracts expire. So while we “lost” 1,800 shares (MFC 100 and GSL 1,700), we are keeping 130,700 shares of stocks for those contracts. That is a 1.4% “loss” track record YTD. Bear in mind that total options income for 2025 is now at $174K, so the “loss” needs to be kept in perspective.

Why I am Happy About GSL’s Share Sale

Again, while the shares were called before the September contract date, there are reasons I don’t care that my shares were called. First of all, the income from the sale, the dividends, and the profit were all tax free. My YTD equity gain was 16.7% for a gain of $6,534. Most of those shares were rolled from my traditional IRA, where I would have had to pay taxes on the gain when I withdrew the cash.

Secondly, during the time I owned the GSL shares I received $3,308 in options income and $8,700 in dividend income. Therefore, the total tax-free income from my investment was over $17K.

Thirdly, GSL only has monthly options, limiting the number of trades I can do in a year. It is true that the dividend yield for GSL is a lofty 7.05%, but I will receive about 4% in dividends while the $44,200 in cash waits for my next buy. In fact, I am considering trading cash covered put options on GSL with some of the cash. The downside is that the put options are only monthly, so tying up cash for a month at a time is not especially appealing to me for that cash.

In Summary

When you trade options, always look at the big picture. If your shares are called, remember that there are good reasons to move on and to use the extra cash for other opportunities that come your way.

In my next post I will start a series of Seven Investing Rules that focus on the following numbers: 3, 4, 5, 10, 22, 72, and 100. These are all related to building up your investments as a wise manager of the resources God has put into your hands for the years you are granted by Him.

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