I originally bought 100 shares of SWY back on Dec. 6th for 19.12/share mentioned in a post here.
This was near the high of the day and I watched as shares trade down into the 17/share range afterwards.
Instead of buying more to average down, I sold a $17 june put on 12/26 and collected $155 in premiums. This trade is listed on my options tab.
Well this week has seen SWY trade up to almost $20/share. I am not convinced that SWY will be a long-term holding. Much of their earnings increases are due to share buy backs. However, they do pay a nice yield, near 4%, and are volatile and liquid enough to be a good options trading candidate. I am willing to collect the dividend and trade some options for extra income while I wait.
Today I sold a $20 Sept call for a $140 premium. So not counting fees, I have collected $295. I have reduced my cost to around $16.17/share. I now plan to wait out these options while collecting dividends. Hopefully the stock stays range-bound between $17-$20 and the options expire.
I will continue trading options in my marginable account as long as I don’t exceed 15% of the value of my DG portfolio in cash needed. I currently have just under $10k in my options account and never exceeded that amount all of last year. I always keep sufficient cash so I am not borrowing and paying any interest.
This is my first post done entirely on my IPAD. It was a pain but I am out of town and could not sleep. I guess I am getting addicted to blogging!
That’s some nice premium you’ve gotten just off SWY. If one of the options execute, got a preference? Lose the shares or double down?
Wow, you’ve already received close to 1/5th of your premiums from last year and we’re not even a month into the new year.
Hey PIP,
The great thing about options is that you get to pick the strike price. I do not mind either way. If I am put another 100 shares then I will look to sell another call. If the put expires and my shares are called away then I will end up with a nice profit. I could also close out the shares early if I choose. There are so many “options”, pun intended.
As for premiums, I do not count them in my totals until the position is closed out. I am still over $500 to start the year though.
Take care!
I enjoy following your options trades. Although if this bull market continues, I imagine that you’ll wind up having a lot of your calls exercised.
The one thing that keeps me away from calls is that I generally don’t want to make bets that my stock will go down in value. Just doesn’t mesh well with my personality.
I am glad that you like following along. As for the calls getting executed, it depends at what strike price you sell. I typically sell just a little out of the money. So I am not betting they are going down but I am just betting they will not go up much or will be range bound. I also typically only sell calls on some of my more speculative plays. For the trade above, Safeway would have to be higher than 21.40 in September for me to be better off by not selling the call. That is about 10% higher than where they currently trade.
Thanks for stopping by!
Thanks for bringing this stock to my attention. I added it to my watch list and briefly studied it. I like it is lower priced and optionable stock which I can trade. I also liked some of the data I could see so far, so I will be trading it (buying puts as long as I get exercised and then selling calls as long as I get exercised and in between collecting dividends).
No problem. Good luck with your trades. I assume you meant selling puts instead of buying. The higher volatility should provide some good opportunities for trading options. Take care.
Oh yes, I meant selling puts… 🙂 Why buying when I can be selling and get better results and have time on my side.
AAI,
Great to see you so active right now. You’re off to a great start for 2013. Keep up the good work.
I’m also glad to see that you enjoy blogging. It’s good to have you part of the community. Your enthusiasm and commitment is inspiring.
Best wishes!
Hey DM.
Thanks for the kind words.
It was blogs like yours that got me interested in blogging and DG investing. It is also useful in holding myself accountable for my actions. Now If I only had your dedication to lowering expenses I could contribute that much more capital! There is always room for improvement.
Thanks for stopping by!