AIG (Covered Call)
Hey guys,
I am trying out a monthly covered call stock option where I have bought 200 shares of AIG at $28.55 and have sold 2 calls at the $28.00 dollar strike for a premium of $2.07 each.
By selling the covered call (in-the money), I am able to have a bullish/neutral position in AIG. My options protect me if the stock goes down to 26.48 which is a 7.6% protection (Break Even) while I can make 5.3% (Max Profit) if the stock trades sideways and/or above $28.00. This strategy limits my maximum profit but it also limits my losses while also giving me a higher probability of success. Hit that like button and I'll update you on the position at/near June 19th expiration!
I am trying out a monthly covered call stock option where I have bought 200 shares of AIG at $28.55 and have sold 2 calls at the $28.00 dollar strike for a premium of $2.07 each.
By selling the covered call (in-the money), I am able to have a bullish/neutral position in AIG. My options protect me if the stock goes down to 26.48 which is a 7.6% protection (Break Even) while I can make 5.3% (Max Profit) if the stock trades sideways and/or above $28.00. This strategy limits my maximum profit but it also limits my losses while also giving me a higher probability of success. Hit that like button and I'll update you on the position at/near June 19th expiration!
Note
updating my current trade as the stock was up over 10% yesterday on the June 27th and my sell call was deep in the money (ITM). To protect my profits, I bought the 28$ strike sell call back and sold the 27$ strike for net credit of .83 cents per share. Because Im selling a deeper ITM call, I've protected my max profit by only missing out on 34 dollars. So in essence I can make 266$ as long as the stock stays above $27 per share instead of 300 dollars. The good news is that if the stock falls lets just say $2, I can buy back my sell call from the $27 strike for about a $200 profit and then I can write another OTM sell call lets say the 30 or 31 strike. In essence, I'm buying and selling the stock (riding the waves) while still being bullish on the stock because I still own the shares. If the stock doesn't go down, then my shares will be sold on June 19th and I'll make $266 in less than 30 days. Not too shabby.
attached below is my P/L curve right now: Sitting at around +$175 puu.sh/FQ4b9/c81211d372.png
Note
The stock has now gone down from $32 per share to $30 per share. I was able to buyback my 27$ strike for 3.95 per contract for which I sold them for 5.08. I protected my position making the difference of $ 1.13 x 200 shares for $226. As the stock has also gone down, my long 200 shares also went down about $200. So in essence, the stock dropped $2 but I didn't lose $2. Not bad for being hedged. Since I'm looking for the stock to find a floor, lets say at $28.00. I still need to hedge my position, and at the same time I still want to be bullish. To maximum on profit, I chose to sell the $30 dollar strike for $1.67 per contract. My average position is now protected to $28 for 200 shares, and my max profit at expiration is now when the stock reaches $30 or higher. I now have the potential to make $410 by sacrificing profits if the stock goes below $28 per share.
The bad news first: If stock goes below $28, I will now lose money. But I will keep my shares and receive the dividend on june 15th.
The good news: I am bullish on this stock and see this dip as a future buying opportunity. If the stock is able to get back above $30 per share by june 19th, I will be able to increase my initial profit by additional 25%.
Note
Closed position 6/4/2020 For nearly $400 dollar profit. Market has gone up strong and my positions were deep in the money. There was no point to wait for expiration and I would make maybe another $15 in 15 days which isn't much of return and I didn't want to roll up like I did in the past. Taking my profits and entered new covered calls for July.
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