Wednesday, April 26, 2017

Options Update: March 2017

I report my options trading activity monthly, usually after options expiration Friday. Doing so allows me to report on expired or assigned options. I also report new options trades and provide a running tally of DivGro's options income to date.

As I mentioned in my Monthly Review for March, I'm finding it challenging to keep DivGro up to date, as work is occupying much of my time. So this update is quite a bit late! In fact, last Friday was option expiration Friday for April, so the clock is already ticking for my next options update!

In February's update, I reported five new options trades and several of rolled trades. I also closed one contract early, while four options expired and one got assigned.

This month, two options got assigned and one expired, while I rolled forward three trades. I have only one new option trade to report. This month, I added only $271 to my tally of secured options income.

Assigned Options


When an option holder exercises an option, it is set to be assigned. In March, two options I sold got assigned, one call and one put.

KMB Call

On 25 November 2016, I sold a $120 call option on KMB with an expiration date of 17 April 2017. Compared with KMB's yield of 3.10% at the time, the annualized yield of the call was 5.69% or 1.84 times the annual dividend income!

#032 :   1xKMB 21 Apr 2017 120.00 C :: $    272.30 



After beating fourth-quarter earnings expectations, KMB's share price climbed more than 10% and well past my call option's $120 strike price. Unfortunately, I couldn't find a suitable way to roll forward this option, so I just waited for the option to be assigned.

Nevertheless, I recorded a net gain of $585, or 4.93% on the original amount invested.

GE Put

On 17 January 2017, I sold the three $31 put options on GE with an expiration date of 3 March 2017, which got assigned:

#048 :   3xGE 03 Mar 2017 31.00 P :: $    178.52 

When taking the options income into account, I ended up paying $30.40 per share, a little more than what shares traded for on 3 March (KMB closed at $30.12 on 3 March).

The "loss" is small enough that it doesn't concern me too much. I've benefitted a lot by selling puts on stocks I wouldn't mind owning, so I'm not going to change my ways because this one didn't quite work out!

Expired Options


In March, only one of my short options expired:

#034 :   1xVLO 17 Mar 2017 70.00 C :: $    104.30 

VLO closed at $68.90 on options expiration Friday, so the $70 covered call options I sold expired. 

Rolled Options


Usually, I sell options that are out of the money and a couple of months away from expiration. I try to strike a reasonable balance between the risk of option assignment and the premium income on offer.

Sometimes, the price of an underlying stock moves faster than anticipated and causes the option I sold to go in the money well before expiration. For covered calls, this means that the underlying stock is trading above the strike price and my shares will be called away on (or before) the expiration date. Likewise, for put contracts, the underlying stock is trading below the strike price, and I'll be expected to buy shares at the higher strike price on (or before) the expiration date.

While I could just wait for option assignment, another possibility is to roll forward the option. This means buying back the option, likely at a higher price than the original premium I collected and selling another option with a later expiration date.

In March, I rolled forward the following options:

#064 :   1xTGT 19 Jan 2018 65.00 C :: $      93.00 ($        -1.10)
#063 :   1xPG 15 Dec 2017 90.00 C :: $    492.00 ($        -1.11)
#062 :   2xPFE 15 Sep 2017 35.00 C :: $    220.00 ($        -1.29)
#061 :   1xTGT 20 Oct 2017 75.00 C :: $    157.00 ($        -5.68)→ #064
#042 :   1xPG 17 Mar 2017 87.50 C :: $    121.30 ($    -382.09)→ #063
#031 :   2xPFE 17 Mar 2017 33.00 C :: $    123.60 ($    -295.29)→ #062

The cost to roll forward these options are shown in parentheses. Rolling the PFE option forward cost me more than I collected in option income, but the call is a $35 call instead of a $33 call, so that's OK.

New Covered Calls


None.

New Put Contracts


Selling put options allows me to set the price I'm willing to pay for a stock I want to buy. In effect, I get paid while waiting for the share price to drop! I sold only one put contract in this period:

#065 : 2017-03-20: Sold to Open 1 Contract of Option WBA Apr 21 2017 84.00 P

I'm willing to buy 100 shares of Walgreens Boots Alliance, Inc. (WBA) for $84.00 per share on or before 21 April. WBA closed at $84.63 per share on the date of my trade:

Open Date :  2017-03-20
Expiration Date :  2017-04-21    Number of Days in Trade : 32
Price at Close :  $84.63 per shareDiscount at Strike Price : 0.74%
Strike Price :  $84.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $1.84 per shareOptions Income : $184.00
Commission : $1.10
Net Premium :  $1.829 per shareNet Options Income : $182.90
Options Yield :  2.16%Annualized Options Yield : 24.67%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $82.17Discount if Exercised : 2.91%

This put option trade yields 2.16%, or 24.67% on an annualized basis. At $84.63 per share, WBA yields 1.77%, so I'm boosting dividend income by a factor of 13.92. If the option is exercised, I'll buy 100 shares at a cost basis of $82.17 per share, a discount of 2.91%.


Selling puts is riskier than selling covered calls. Generally, I like to see a dividend boost factor of five or more, unless I can buy shares at a discount of at least 10%. WBA easily beats my boost factor threshold. 

Options Income Tally


Here is a running tally of the total amount received from options trades, as well as the options premiums secured due to options that expired:

#065 :   1xWBA 21 Apr 2017 84.00 P :: $    184.00 ($        -1.10)« total: $ 10,953.65 • secured: $   4,446.05 »
#064 :   1xTGT 19 Jan 2018 65.00 C :: $      93.00 ($        -1.10)« total: $ 10,770.75 • secured: $   4,447.15 »
#063 :   1xPG 15 Dec 2017 90.00 C :: $    492.00 ($        -1.11)« total: $ 10,678.85 • secured: $   4,448.25 »
#062 :   2xPFE 15 Sep 2017 35.00 C :: $    220.00 ($        -1.29)« total: $ 10,187.96 • secured: $   4,449.36 »
#061 :   1xTGT 20 Oct 2017 75.00 C :: $    157.00 ($        -5.68)→ #064« total: $   9,969.25 • secured: $   4,450.65 »
#060 :   2xQCOM 21 Jul 2017 57.50 C :: $    580.00 ($        -1.00)« total: $   9,817.93 • secured: $   4,299.33 »
#059 :   2xQCOM 21 Jul 2017 57.50 C :: $    573.00 ($        -1.30)« total: $   9,238.93 • secured: $   4,300.33 »
#058 :   1xPFE 15 Sep 2017 35.00 C :: $    113.00 ($        -1.00)« total: $   8,667.23 • secured: $   4,301.63 »
#057 :   3xINTC 19 May 2017 35.00 P :: $    270.00 ($        -2.88)« total: $   8,555.23 • secured: $   4,302.63 »
#056 : 10xF 16 Jun 2017 13.00 C :: $    350.00 ($        -7.96)« total: $   8,288.11 • secured: $   4,305.51 »
#055 :   2xCVS 19 May 2017 75.00 P :: $    184.00 ($        -0.99)« total: $   7,946.07 • secured: $   4,313.47 »
#054 :   2xABBV 19 May 2017 65.00 C :: $    194.00 ($        -0.99)« total: $   7,763.06 • secured: $   4,314.46 »
#053 :   2xQCOM 17 Mar 2017 55.00 C :: $    177.00 ($    -374.58)→ #059« total: $   7,570.05 • secured: $   4,315.45 »
#052 :   2xQCOM 10 Feb 2017 53.50 C :: $      42.00 ($    -108.37)→ #053« total: $   7,767.63 • secured: $   4,513.03 »
#051 :   2xQCOM 17 Mar 2017 52.50 P :: $    334.41 ($      -40.99)« total: $   7,834.00 • secured: $   4,579.40 »
#050 :   2xTGT 21 Jul 2017 70.00 P :: $ 1,537.40 « total: $   7,540.58 • secured: $   4,285.98 »
#049 :   1xD 21 Apr 2017 75.00 C :: $    247.60 « total: $   6,003.18 • secured: $   4,285.98 »
#048 :   3xGE 03 Mar 2017 31.00 P :: $    178.52 « total: $   5,755.58 • secured: $   4,285.98 »
#047 :   3xINTC 03 Mar 2017 36.00 P :: $    241.52 ($      -47.87)→ #057« total: $   5,577.06 • secured: $   4,107.46 »
#046 :   1xGILD 16 Jun 2017 85.00 C :: $    296.90 « total: $   5,383.41 • secured: $   3,913.81 »
#045 :   4xF 17 Mar 2017 13.00 C :: $    110.20 ($      -26.37)→ #056« total: $   5,086.51 • secured: $   3,913.81 »
#044 :   1xTGT 21 Apr 2017 77.50 C :: $    192.30 ($      -12.58)→ #061« total: $   5,002.68 • secured: $   3,829.98 »
#043 :   2xTGT 20 Jan 2017 72.50 P :: $    237.60 ($ -1,552.56)→ #050« total: $   4,822.96 • secured: $   3,650.26 »
#042 :   1xPG 17 Mar 2017 87.50 C :: $    121.30 ($    -382.09)→ #063« total: $   6,137.92 • secured: $   4,965.22 »
#041 :   1xKO 19 May 2017 42.00 C :: $    128.30 « total: $   6,398.71 • secured: $   5,226.01 »
#040 :   1xCSCO 21 Apr 2017 32.00 C :: $      45.30 « total: $   6,270.41 • secured: $   5,226.01 »
#039 :   3xINTC 17 Feb 2017 35.00 P :: $    179.90 « total: $   6,225.11 • secured: $   5,226.01 »
#038 :   3xT 17 Feb 2017 40.00 P :: $    140.90 « total: $   6,045.21 • secured: $   5,046.11 »
#037 :   1xKO 19 May 2017 43.00 C :: $    112.30 « total: $   5,904.31 • secured: $   4,905.21 »
#036 :   1xABBV 17 Feb 2017 62.50 C :: $    153.30 « total: $   5,792.01 • secured: $   4,905.21 »
#035 :   1xDIS 16 Jun 2017 105.00 C :: $    307.30 « total: $   5,638.71 • secured: $   4,751.91 »
#034 :   1xVLO 17 Mar 2017 70.00 C :: $    104.30 « total: $   5,331.41 • secured: $   4,751.91 »
#033 :   2xTROW 21 Apr 2017 65.00 P :: $    221.60 « total: $   5,227.11 • secured: $   4,647.61 »
#032 :   1xKMB 21 Apr 2017 120.00 C :: $    272.30 « total: $   5,005.51 • secured: $   4,647.61 »
#031 :   2xPFE 17 Mar 2017 33.00 C :: $    123.60 ($    -295.29)→ #062« total: $   4,733.21 • secured: $   4,375.31 »
#030 :   1xABBV 17 Feb 2017 62.50 C :: $    153.30 « total: $   4,904.90 • secured: $   4,547.00 »
#029 :   2xCSCO 21 Apr 2017 32.00 C :: $      95.60 « total: $   4,751.60 • secured: $   4,393.70 »
#028 :   1xDIS 16 Jun 2017 105.00 C :: $    262.30 « total: $   4,656.00 • secured: $   4,393.70 »
#027 :   1xQCOM 17 Feb 2017 70.00 C :: $    194.30 ($        -1.00)« total: $   4,393.70 • secured: $   4,393.70 »
#026 :   1xQCOM 17 Feb 2017 70.00 C :: $    192.30 ($        -1.00)« total: $   4,200.40 • secured: $   4,200.40 »
#025 :   3xCSCO 16 Dec 2016 30.00 P :: $    110.90 « total: $   4,009.10 • secured: $   4,009.10 »
#024 :   6xF 17 Mar 2017 13.00 C :: $    138.79 ($      -39.56)→ #056« total: $   3,898.20 • secured: $   3,898.20 »
#023 :   2xWMT 18 Nov 2016 67.50 P :: $    247.60 « total: $   3,798.97 • secured: $   3,798.97 »
#022 :   1xHSY 20 Jan 2017 90.00 P :: $    195.30 « total: $   3,551.37 • secured: $   3,551.37 »
#021 :   1xGD 20 Jan 2017 130.00 P :: $    127.30 « total: $   3,356.07 • secured: $   3,356.07 »
#020 :   2xWFC 18 Nov 2016 44.00 P :: $    161.60 « total: $   3,228.77 • secured: $   3,228.77 »
#019 :   2xNKE 16 Dec 2016 50.00 P :: $    209.60 « total: $   3,067.17 • secured: $   3,067.17 »
#018 :   1xKO 16 Dec 2016 42.00 C :: $    107.30 « total: $   2,857.57 • secured: $   2,857.57 »
#017 :   6xF 20 Jan 2017 11.00 P :: $    186.79 « total: $   2,750.27 • secured: $   2,750.27 »
#016 :   1xGILD 17 Feb 2017 95.00 C :: $    104.30 ($    -234.09)→ #046« total: $   2,563.48 • secured: $   2,563.48 »
#015 :   1xPFE 17 Mar 2017 35.00 C :: $      74.30 ($      -10.99)« total: $   2,693.27 • secured: $   2,693.27 »
#014 :   1xUNP 16 Dec 2016 97.50 C :: $    210.30 ($      -17.22)« total: $   2,629.96 • secured: $   2,629.96 »
#013 :   2xPFE 28 Oct 2016 34.00 P :: $    119.60 ($      -17.00)« total: $   2,436.88 • secured: $   2,436.88 »
#012 :   1xJNJ 18 Nov 2017 115.00 P :: $    135.30 « total: $   2,334.28 • secured: $   2,334.28 »
#011 :   1xRAI 17 Feb 2016 52.50 C :: $    124.30 « total: $   2,198.98 • secured: $   2,198.98 »
#010 :   1xKMB 21 Oct 2016 130.00 C :: $    112.30 « total: $   2,074.68 • secured: $   2,074.68 »
#009 :   1xD 20 Jan 2017 75.00 C :: $    299.30 ($      -65.39)« total: $   1,962.38 • secured: $   1,962.38 »
#008 :   3xINTC 21 Oct 2016 35.00 P :: $    248.90 « total: $   1,728.47 • secured: $   1,728.47 »
#007 :   2xCSCO 21 Oct 2016 31.00 C :: $    189.93 « total: $   1,479.57 • secured: $   1,479.57 »
#007 :   1xCSCO 21 Oct 2016 31.00 C :: $      94.97 ($      -17.07)« total: $   1,289.64 • secured: $   1,289.64 »
#006 :   6xF 18 Nov 2016 13.00 C :: $    156.79 « total: $   1,211.74 • secured: $   1,211.74 »
#005 :   1xDIS 18 Nov 2016 100.00 C :: $    113.30 « total: $   1,054.95 • secured: $   1,054.95 »
#004 :   3xCSCO 19 Aug 2016 31.00 P :: $    197.90 ($      -17.00)« total: $      941.65 • secured: $      941.65 »
#003 :   1xDIS 19 Aug 2016 98.50 C :: $      87.30 « total: $      760.75 • secured: $      760.75 »
#002 :   1xTGT 20 Jan 2017 65.00 P :: $    361.75 ($        -3.79)« total: $      673.45 • secured: $      673.45 »
#001 :   6xF 19 Aug 2016 13.00 C :: $    315.49 « total: $      315.49 • secured: $      315.49 »

key:  open • expired  •  closed  •  assigned  •  rolled → new option  

Goals Progress


I'm hoping to earn $8,400 in options income in 2017. I'm only counting secured options income, or income from options with no further obligations.


Total
Options Income
Secured
Options Income
This Month:
$ 10,954$   4,446
Last Month:
$ 10,661$   4,175
Difference:
$      293$      271

Year to date I've earned $2,318 in options income or 27.6% of my options income goal for 2017.

Take care everybody and thanks for reading!

I'm still a learner options trader. If you see anything you disagree with or question, please let me know in the comments below. Or if you just want to share some advice or encouragement, I'd be happy to hear from you, too!

6 comments :

  1. Awesome job DivGro! I've been taking it easy on options lately. You've inspired me to start looking at them again! Thanks,

    ReplyDelete
    Replies
    1. Thanks, Passive Income Dude -- glad that my activities are inspiring you! All the best with your investments and trades!

      Delete
  2. Very nicely done. I'm always interested in this type of investing. I am not really exposed to this type so I always like reading this. Cheers

    ReplyDelete
    Replies
    1. Thanks, Buy, Hold Long! Hopefully you'll get to learn options trading soon. Take care and happy investing!

      Delete
  3. hey DivGro!

    good job!
    may I ask you a question? why exactly 8400 Dollar from options prämien? :)

    best regards
    Chri

    ReplyDelete
    Replies
    1. Hi, easydividend -- $8,400 / 12 = $700 per month. Last year's average monthly secured options income (over 6 months) was $355. So $700 is a stretching, but doable goal!

      Delete

Contact Form

Name

Email *

Message *

Follow by Email