Well, I've been lying low on TK lately. I've gone to school full time this summer, so I don't have quite as much time to blog or trade. I'm working toward an MBA (a second MA), and then, maybe a Phd.
But anyway, a few of you may recall that I sold my first batch of covered calls about a month ago. That went well. I made about $112-$116 altogether (I think $56 a piece). Well, the calls were sold on my Dell stock, and Dell languished there for a few weeks, and I could have bought the calls back for $10 a piece and netted a mighty decent profit. But, I thought, "Hey, Dell is dead in the water right now. I'll just wait 10 more days and let the options expire worthless and book 100% profit on those covered calls I sold." In fact, I picked up an extra 100 shares of Dell at sub-$19 prices so I could sell even more covered calls after the first ones expired.
Well, as it turns out, my plan changed because Dell came within five days of expiration, and then went up significantly. Here's a chart that shows the last few days movements:
Well, seeing as the option would likely execute automatically on Saturday if the stock stayed above $20, I went ahead and bought my options back for $50 a piece. (Buying them a few days earlier at $10 would have been nice, but like I said, I thought they would expire...) Anyways, if you include trade fees, I basically broke even on the options. But, once I was rid of the options, I could sell the stock. So I did. I had 304 shares at a cost basis of $19.17 and sold them all for $20.34. I was pretty good about picking the top (on Wednesday), and the red circle near the top of the chart above shows about when I sold. So anyway, I made a quick $340-$350.
Anyways, not too shabby. If the options I sold had expired, I would have pocketed the premium ($112). As it is, I bought the options back for $100 (about break even), but sold the underlying stock for $340-$350 (I forgot the exact figure.) Not too shabby.
I like this strategy of selling covered calls and retaining the underlying stock. So far, it seems to work well enough for me...well, at least until I get up enough courage to try one of Doc Mayer's plays.
In the words of WSK,
PEACE!
