Options Update: May 2017

I report my options trading activity monthly, usually shortly 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.

In last month's option update I added $918 to my tally of secured options income. This month I'm adding $1,635 more. I'm getting close to achieving my goal of earning $8,400 in options income in 2017. At this pace, I'll have to revise my goal upwards! Is it realistic to go for $12,000 instead? I wonder.

In May, two options got assigned, two expired, and I closed one option early. Also, I rolled forward three trades and sold one put. Following are details of all my options trades.

Assigned Options

When an option holder exercises an option, it is set to be assigned.

In April, two options contracts I sold got assigned.

The first is two put contracts on Target Corporation (TGT). In January I rolled forward two $72.50 puts on TGT when they quickly moved into the money. In doing so, I reduced my obligation by selling two July $70 puts:

#043 :   2	x	TGT Jan 20 2017 72.50 P	::	$    237.60	($ -1,552.56)	→ #050
#050 :   2	x	TGT Jul 21 2017 70.00 P	::	$ 1,537.40

Unfortunately, the options got assigned more than a month early, which is one of the risks you have to accept with American-style options. As a consequence, I bought 200 shares of TGT for $70 per share. With TGT trading at $55.35, the assignment handed me an immediate (unrealized) loss of $2,930. However, in return, I received $1,537 in secured options income.

I now own 340 shares of TGT at an average cost basis of $70.32 and an initial yield on cost (YoC) of 3.41%. The buy boosts DivGro's projected annual dividend income (PADI) by $480.

The second assignment is two $36 put contracts on Intel Corporation (INTC):

#069 :   2

x

INTC 19 May 2017 36.00 P

::

$    192.00

($        -0.99)

With INTC trading at $35.40 on expiration day, the puts expired in the money, and so I bought 200 shares of INTC for $36 per share. Notice though, that I received $0.95 per share in options income. So, effectively, I bought shares for $35.05 per share.

I now own 540 shares of INTC at an average cost basis of $27.50 and an initial YoC of 3.96%. The buy boosts DivGro's PADI by $218.

Expired Options

In May, two of my short options expired:

#055 :   2	x	CVS 19 May 2017 75.00 P	::	$    184.00
#070 :   1	x	XOM 19 May 2017 80.00 P	::	$    116.00

On options expiration day, CVS Health Corporation (CVS) closed at $76.32, and Exxon Mobil Corporation (XOM) closed at $81.93, respectively, so both short put options expired.

Closed Options

Sometimes it is possible to close options early and secure most of the options income. This happens when an out of the money option goes further out of the money. These options become less expensive when the stock price moves away from the strike price because there is a smaller chance that the stock price will cross the strike price and go in the money.

In May, I closed one put option early:

#057 :     3

x

INTC 19 May 2017 35.00 P

::

$    270.00

($ -42.70)

→ secured 84% of available income

The cost of buying back the put option is shown in parentheses. Having secured 84% of available income, I decided to close these options early and to add a total of $227.30 to my options income tally.

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 May, I rolled forward the following options:

#028 :   1	x	DIS 16 Jun 2017 105.00 C	::	$    262.30	($  -530.50)	→ #078
#035 :   1	x	DIS 16 Jun 2017 105.00 C	::	$    307.30	($  -530.50)	→ #078
#078 :   2	x	DIS 15 Dec 2017 110.00 C	::	$ 1,090.60	($      -1.01)

By going to the December expiration for the covered call options on my shares of The Walt Disney Company (DIS), I managed to earn a little extra premium income and simultaneously increased the strike price to $110.

#037 :   1	x	KO 19 May 2017 43.00 C	::	$    112.30	($    -66.56)	→ #079
#041 :   1	x	KO 19 May 2017 42.00 C	::	$    128.30	($  -161.56)	→ #079
#079 :   2	x	KO 19 Jan 2018 45.00 C	::	$    300.00	($      -3.13)

For my covered calls on my shares of The Coca-Cola Company (KO), I also earned extra premium income and increased the strike price to $45, but I had roll-forward all the way to January 2018.

Finally, I rolled forward two covered calls on my shares of AbbVie Inc (ABBV):

#054 :   2	x	ABBV 19 May 2017 65.00 C	::	$    194.00	($  -366.58)	→ #077
#077 :   2	x	ABBV 15 Sep 2017 67.50 C	::	$    408.00	($      -1.60)

As before, I collected extra premium income and increased the strike price to $67.50 for a little breathing room.

New Covered Calls

Selling covered calls is a way to collect extra income on stocks you already own. I did not execute any covered call trades in May.

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:

---

#080 : 2017-05-12: Sold to Open 1 Contract of Option OC Aug 18 2017 60.00 P

I'm willing to buy 100 shares of Owens Corning (OC) for $60.00 per share on or before 18 August. OC closed at $60.87 per share on the date of my trade:

Open Date :  2017-05-12 Expiration Date :  2017-08-18     Number of Days in Trade :  98 Price at Close :  $60.87 per share Discount at Strike Price :  1.43% Strike Price :  $60.00 per share Number of Contracts : 1 Number of Shares : 100 Put Premium :  $2.10 per share Options Income :  $210.00 Commission :  -$1.95 Net Premium :  $2.120 per share Net Options Income :  $211.95 Options Yield :  3.48% Annualized Options Yield :  12.98% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $57.88 Discount if Exercised :  4.91%

This put option trade yields 3.48%, or 12.98% on an annualized basis. At $60.87 per share, OC yields 1.31%, so I'm boosting dividend income by a factor of 9.87. If the option is exercised, I'll buy 100 shares at a cost basis of $57.88 per share, a discount of 4.91%.

---

Selling puts is riskier than selling covered calls. Generally, I like to see a dividend boost factor of 5.00 or more, unless I can buy shares at a discount of at least 10%. With a dividend boost factor of 9.87, the short put trade on OC provides good compensation for the risk I'm taking on.

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:

key:  expired  •  closed  •  rolled  •  assigned  •  open 

ID	DATE	:	NO	×	TICKER OPTION	INCOME	( EXPENSES )	ROLLED	TOTAL	➤ SECURED
#080	2017-05-12	:	1	×	OC 18 Aug 2017 $60.00 P	$    210.00	( $        -1.95 )		$ 12,947.53	➤ $ 6,939.53
#079	2017-05-12	:	2	×	KO 19 Jan 2018 $45.00 C	$    200.00	( $        -3.13 )		$ 12,739.48	➤ $ 6,941.48
#078	2017-05-12	:	2	×	DIS 15 Dec 2017 $110.00 C	$ 1,090.00	( $        -1.01 )		$ 12,542.61	➤ $ 6,944.61
#077	2017-05-12	:	2	×	ABBV 15 Sep 2017 $67.50 C	$    408.00	( $        -1.60 )		$ 11,453.62	➤ $ 6,945.62
#076	2017-04-21	:	2	×	LOW 21 Jul 2017 $80.00 P	$    408.00	( $        -1.00 )		$ 11,047.22	➤ $ 6,947.22
#075	2017-04-21	:	3	×	INTC 16 Jun 2017 $35.00 P	$    189.00	( $        -3.86 )		$ 10,640.22	➤ $ 6,948.22
#074	2017-04-21	:	2	×	GILD 15 Sep 2017 $75.00 C	$    210.00	( $        -1.59 )		$ 10,455.08	➤ $ 6,952.08
#073	2017-04-21	:	20	×	F 16 Jun 2017 $12.00 C	$    320.00	( $        -9.11 )		$ 10,246.67	➤ $ 6,953.67
#072	2017-04-21	:	1	×	D 20 Oct 2017 $77.50 C	$    323.00	( $        -0.35 )		$ 9,935.78	➤ $ 6,962.78
#071	2017-04-21	:	5	×	BAC 21 Jul 2017 $20.00 P	$    160.00	( $        -2.28 )		$ 9,613.13	➤ $ 6,963.13
#070	2017-04-04	:	1	×	XOM 19 May 2017 $80.00 P	$    116.00	( $        -1.00 )		$ 9,455.41	➤ $ 6,965.41
#069	2017-04-04	:	2	×	INTC 19 May 2017 $36.00 P	$    192.00	( $        -0.99 )		$ 9,340.41	➤ $ 6,850.41
#068	2017-04-04	:	2	×	CSCO 18 Aug 2017 $31.00 P	$    146.00	( $        -0.99 )		$ 9,149.40	➤ $ 6,659.40
#067	2017-04-03	:	1	×	HRL 15 Sep 2017 $37.50 C	$      84.00	( $        -1.10 )		$ 9,004.39	➤ $ 6,660.39
#066	2017-04-03	:	1	×	CSCO 20 Oct 2017 $33.00 C	$    189.00	( $        -1.59 )		$ 8,921.49	➤ $ 6,661.49
#065	2017-03-20	:	1	×	WBA 21 Apr 2017 $84.00 P	$    184.00	( $        -1.10 )		$ 8,734.08	➤ $ 6,663.08
#064	2017-03-17	:	1	×	TGT 19 Jan 2018 $65.00 C	$      93.00	( $        -1.10 )		$ 8,551.18	➤ $ 6,480.18
#063	2017-03-17	:	1	×	PG 15 Dec 2017 $90.00 C	$    492.00	( $        -1.11 )		$ 8,459.28	➤ $ 6,481.28
#062	2017-03-17	:	2	×	PFE 15 Sep 2017 $35.00 C	$    220.00	( $        -1.29 )		$ 7,968.39	➤ $ 6,482.39
#061	2017-02-24	:	1	×	TGT 20 Oct 2017 $75.00 C	$    157.00	( $        -5.68 )	→ #064	$ 7,749.68	➤ $ 6,483.68
#060	2017-02-24	:	2	×	QCOM 21 Jul 2017 $57.50 C	$    580.00	( $        -1.00 )		$ 7,598.36	➤ $ 6,332.36
#059	2017-02-24	:	2	×	QCOM 21 Jul 2017 $57.50 C	$    573.00	( $        -1.30 )		$ 7,019.36	➤ $ 6,333.36
#058	2017-02-24	:	1	×	PFE 15 Sep 2017 $35.00 C	$    113.00	( $        -1.00 )		$ 6,447.66	➤ $ 6,334.66
#057	2017-02-24	:	3	×	INTC 19 May 2017 $35.00 P	$    270.00	( $      -42.70 )		$ 6,335.66	➤ $ 6,335.66
#056	2017-02-24	:	10	×	F 16 Jun 2017 $13.00 C	$    350.00	( $      -47.99 )		$ 6,108.36	➤ $ 6,108.36
#055	2017-02-24	:	2	×	CVS 19 May 2017 $75.00 P	$    184.00	( $        -0.99 )		$ 5,806.35	➤ $ 5,806.35
#054	2017-02-24	:	2	×	ABBV 19 May 2017 $65.00 C	$    194.00	( $    -366.58 )	→ #077	$ 5,623.34	➤ $ 5,623.34
#053	2017-02-10	:	2	×	QCOM 17 Mar 2017 $55.00 C	$    177.00	( $    -374.58 )	→ #059	$ 5,795.92	➤ $ 5,795.92
#052	2017-02-07	:	2	×	QCOM 10 Feb 2017 $53.50 C	$      42.00	( $    -108.37 )	→ #053	$ 5,993.50	➤ $ 5,993.50
#051	2017-01-26	:	2	×	QCOM 17 Mar 2017 $52.50 P	$    336.00	( $      -42.58 )		$ 6,059.87	➤ $ 6,059.87
#050	2017-01-20	:	2	×	TGT 21 Jul 2017 $70.00 P	$ 1,540.00	( $        -2.60 )		$ 5,766.45	➤ $ 5,766.45
#049	2017-01-20	:	1	×	D 21 Apr 2017 $75.00 C	$    248.00	( $    -301.74 )	→ #072	$ 4,229.05	➤ $ 4,229.05
#048	2017-01-17	:	3	×	GE 03 Mar 2017 $31.00 P	$    180.00	( $        -1.48 )		$ 4,282.79	➤ $ 4,282.79
#047	2017-01-17	:	3	×	INTC 03 Mar 2017 $36.00 P	$    243.00	( $      -49.35 )	→ #057	$ 4,104.27	➤ $ 4,104.27
#046	2017-01-20	:	1	×	GILD 16 Jun 2017 $85.00 C	$    298.00	( $      -12.19 )		$ 3,910.62	➤ $ 3,910.62
#045	2016-12-27	:	4	×	F 17 Mar 2017 $13.00 C	$    120.00	( $      -36.17 )	→ #056	$ 3,624.81	➤ $ 3,624.81
#044	2016-12-27	:	1	×	TGT 21 Apr 2017 $77.50 C	$    200.00	( $      -20.28 )	→ #061	$ 3,540.98	➤ $ 3,540.98
#043	2016-12-23	:	2	×	TGT 20 Jan 2017 $72.50 P	$    246.00	( $ -1,560.96 )	→ #050	$ 3,361.26	➤ $ 3,361.26
#042	2016-12-23	:	1	×	PG 17 Mar 2017 $87.50 C	$    129.00	( $    -389.79 )	→ #063	$ 4,676.22	➤ $ 4,676.22
#041	2016-12-23	:	1	×	KO 19 May 2017 $42.00 C	$    136.00	( $    -169.26 )	→ #079	$ 4,937.01	➤ $ 4,937.01
#040	2016-12-23	:	1	×	CSCO 21 Apr 2017 $32.00 C	$      53.00	( $    -180.28 )	→ #066	$ 4,970.27	➤ $ 4,970.27
#039	2016-12-21	:	3	×	INTC 17 Feb 2017 $35.00 P	$    189.00	( $        -9.10 )		$ 5,097.55	➤ $ 5,097.55
#038	2016-12-21	:	3	×	T 17 Feb 2017 $40.00 P	$    150.00	( $        -9.10 )		$ 4,917.65	➤ $ 4,917.65
#037	2016-12-09	:	1	×	KO 18 May 2017 $43.00 C	$    120.00	( $      -74.26 )	→ #079	$ 4,776.75	➤ $ 4,776.75
#036	2016-12-05	:	1	×	ABBV 17 Feb 2017 $62.50 C	$    161.00	( $        -7.70 )		$ 4,731.01	➤ $ 4,731.01
#035	2016-12-05	:	1	×	DIS 16 Jun 2017 $105.00 C	$    315.00	( $    -538.20 )	→ #078	$ 4,577.71	➤ $ 4,577.71
#034	2016-12-05	:	1	×	VLO 17 Mar 2017 $70.00 C	$    112.00	( $        -7.70 )		$ 4,800.91	➤ $ 4,800.91
#033	2016-12-05	:	2	×	TROW 21 Apr 2017 $65.00 P	$    230.00	( $        -8.40 )		$ 4,696.61	➤ $ 4,696.61
#032	2016-11-25	:	1	×	KMB 21 Apr 2017 $120.00 C	$    280.00	( $        -7.70 )		$ 4,475.01	➤ $ 4,475.01
#031	2016-11-25	:	2	×	PFE 17 Mar 2017 $33.00 C	$    132.00	( $    -303.69 )	→ #062	$ 4,202.71	➤ $ 4,202.71
#030	2016-11-25	:	1	×	ABBV 17 Feb 2017 $62.50 C	$    161.00	( $        -7.70 )		$ 4,374.40	➤ $ 4,374.40
#029	2016-11-25	:	2	×	CSCO 21 Apr 2017 $32.00 C	$    104.00	( $        -8.40 )		$ 4,221.10	➤ $ 4,221.10
#028	2016-11-25	:	1	×	DIS 16 Jun 2017 $105.00 C	$    270.00	( $    -538.20 )	→ #078	$ 4,125.50	➤ $ 4,125.50
#027	2016-11-25	:	1	×	QCOM 17 Feb 2017 $70.00 C	$    202.00	( $        -8.70 )		$ 4,393.70	➤ $ 4,393.70
#026	2016-11-25	:	1	×	QCOM 17 Feb 2017 $70.00 C	$    200.00	( $        -8.70 )		$ 4,200.40	➤ $ 4,200.40
#025	2016-11-25	:	3	×	CSCO 16 Dec 2016 $30.00 P	$    120.00	( $        -9.10 )		$ 4,009.10	➤ $ 4,009.10
#024	2016-11-25	:	6	×	F 17 Mar 2017 $13.00 C	$    150.00	( $      -50.77 )	→ #056	$ 3,898.20	➤ $ 3,898.20
#023	2016-10-14	:	2	×	WMT 18 Nov 2016 $67.50 P	$    256.00	( $        -8.40 )		$ 3,798.97	➤ $ 3,798.97
#022	2016-10-14	:	1	×	HSY 20 Jan 2017 $90.00 P	$    203.00	( $        -7.70 )		$ 3,551.37	➤ $ 3,551.37
#021	2016-10-14	:	1	×	GD 20 Jan 2017 $130.00 P	$    135.00	( $        -7.70 )		$ 3,356.07	➤ $ 3,356.07
#020	2016-10-11	:	2	×	WFC 18 Nov 2016 $44.00 P	$    170.00	( $        -8.40 )		$ 3,228.77	➤ $ 3,228.77
#019	2016-10-07	:	2	×	NKE 16 Dec 2016 $50.00 P	$    218.00	( $        -8.40 )		$ 3,067.17	➤ $ 3,067.17
#018	2016-09-26	:	1	×	KO 16 Dec 2016 $42.00 C	$    115.00	( $        -7.70 )		$ 2,857.57	➤ $ 2,857.57
#017	2016-09-26	:	6	×	F 20 Jan 2017 $11.00 P	$    198.00	( $      -11.21 )		$ 2,750.27	➤ $ 2,750.27
#016	2016-09-26	:	1	×	GILD 17 Feb 2017 $95.00 C	$    112.00	( $    -241.79 )	→ #046	$ 2,563.48	➤ $ 2,563.48
#015	2016-09-26	:	1	×	PFE 17 Mar 2017 $35.00 C	$      82.00	( $      -18.69 )		$ 2,693.27	➤ $ 2,693.27
#014	2016-09-26	:	1	×	UNP 16 Dec 2016 $97.50 C	$    218.00	( $      -24.92 )		$ 2,629.96	➤ $ 2,629.96
#013	2016-09-26	:	2	×	PFE 28 Oct 2016 $34.00 P	$    128.00	( $      -25.40 )		$ 2,436.88	➤ $ 2,436.88
#012	2016-09-08	:	1	×	JNJ 18 Nov 2016 $115.00 P	$    143.00	( $        -7.70 )		$ 2,334.28	➤ $ 2,334.28
#011	2016-09-07	:	1	×	RAI 17 Feb 2017 $52.50 C	$    132.00	( $        -7.70 )		$ 2,198.98	➤ $ 2,198.98
#010	2016-09-07	:	1	×	KMB 21 Oct 2016 $130.00 C	$    120.00	( $        -7.70 )		$ 2,074.68	➤ $ 2,074.68
#009	2016-09-07	:	1	×	D 20 Jan 2017 $75.00 C	$    307.00	( $      -73.09 )		$ 1,962.38	➤ $ 1,962.38
#008	2016-08-30	:	3	×	INTC 21 Oct 2016 $35.00 P	$    258.00	( $        -9.10 )		$ 1,728.47	➤ $ 1,728.47
#007	2016-08-30	:	3	×	CSCO 21 Oct 2016 $31.00 C	$    294.00	( $      -26.17 )		$ 1,479.57	➤ $ 1,479.57
#006	2016-08-29	:	6	×	F 18 Nov 2016 $13.00 C	$    168.00	( $      -11.21 )		$ 1,211.74	➤ $ 1,211.74
#005	2016-08-26	:	1	×	DIS 18 Nov 2016 $100.00 C	$    121.00	( $        -7.70 )		$ 1,054.95	➤ $ 1,054.95
#004	2016-08-09	:	3	×	CSCO 19 Aug 2016 $31.00 P	$    207.00	( $      -26.10 )		$    941.65	➤ $    941.65
#003	2016-08-09	:	1	×	DIS 19 Aug 2016 $98.50 C	$      95.00	( $        -7.70 )		$    760.75	➤ $    760.75
#002	2016-06-16	:	1	×	TGT 20 Jan 2017 $65.00 P	$    370.00	( $      -12.04 )		$    673.45	➤ $    673.45
#001	2016-06-01	:	6	×	F 19 Aug 2016 $13.00 C	$    330.00	( $      -14.51 )		$    315.49	➤ $    315.49

key:  expired  •  closed  •  rolled  •  assigned  •  open 

For a complete listing of all options transactions, please visit my Options History page.

Goals Progress

I'm count secured options income, which is income from options with no further obligations.

	Total Options Income		Secured Options Income
This Month:	$ 12,948		$   6,940
Last Month:	$ 12,742		$   5,305
Difference:	$      306		$   1,635

I started 2017 with $2,512 in secured options income, so with $6,940 secured through May 2017, I've earned $4,428 in options income. This is 52.7% 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!