Options Update: July 2017

DivGro is about generating a reliable and growing dividend income stream. I invest mainly in quality dividend growth stocks with a track record of paying and regularly increasing dividends.

Since 2013 when I started DivGro, my portfolio has generated dividend income totaling about $38,000. While that's a decent chunk of change, I realized that I could boost my dividend income through options trading.

In my monthly options update, I report my options trades and provide a running tally of DivGro's options income to date.

In 2017, I'm hoping to earn $8,400 in options income. This month I added secured options income of $1,376, increasing 2017's total to $6,274. (Last month I collected only $469, so I'm very happy with this month's total!)

In July, two options expired and I sold one covered calls and seven put contracts. Additionally, I closed two options early and rolled forward three options. Following are details of all my options trades.

Assigned Options

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

None of the options contracts I previously sold got assigned in July.

Expired Options

In July, two short options expired, both puts:

#081 : 2	x	AXP 21 Jul 2017 80.00 P	::	$ 266.00		($ -1.00)
#071 : 5	x	BAC 21 Jul 2017 20.00 P	::	$ 160.00		($ -2.28)

On options expiration day, American Express (AXP) closed at $85.59 and Bank of America (BAC) closed at $23.83, respectively, so both short put options expired.

Closed Options

When an out of the money option goes further out of the money, you can close the option early and secure most of the options income.

In July, I closed two options early:

#060 : 2	x	QCOM 21 Jul 2017 57.50 C	::	$ 579.00		($ -122.57) → secured 79% of available income
#059 : 2	x	QCOM 21 Jul 2017 57.50 C	::	$ 571.70		($ -121.77) → secured 79% of available income

The cost of buying back the put options is shown in parentheses. Having secured 79% of available income, I decided to close these options early and to add a total of $906.36 to my options income tally.

Rolled Options

Rolling forward options means buying back an option and selling another option with a later expiration date. You can do this to avoid options assignment for in the money options.

In July, I rolled forward the following options:

#062 :   2	x	PFE 15 Sep 2017 35.00 C	::	$ 218.71	($  -21.28)	→ #101
#058 :   1	x	PFE 15 Sep 2017 35.00 C	::	$ 112.00	($  -11.09)	→ #101
#101 :   3	x	PFE 15 Dec 2017 34.00 C	::	$ 210.00	($    -2.39)

By going to the December expiration for the covered call options on my shares of Pfizer (PFE) and dropping the strike price to $34, I managed to earn a little extra premium income. PFE is trading at $33.43 per share.

#076 :   2	x	LOW 21 Jul 2017 80.00 P	::	$ 407.00	($ -742.57)	→ #100
#100 :   2	x	LOW 19 Jan 2018 75.0 P	::	$ 830.00	($     -2.59)

With Lowe's Companies (LOW) trading below the strike price of my short puts, I decided to roll them to January 2018. In the process, I lowered the strike price to $75 and earned a little extra premium income. LOW's current share price is $77.91.

Finally, I rolled forward the covered calls on my shares of General Electric (GE):

#091 :   3	x	GE 15 Sep 2017 33.00 C	::	$   97.51	($  -3.98)	→ #099
#099 :   3	x	GE 18 Jun 2018 30.00 C	::	$ 153.00	($  -2.09)

Again, I collected extra premium income and decreased the strike price to $30.00, but I had to go out all the way to June 2018 to do so. GE is trading at $25.76 per share.

New Covered Calls

Selling covered calls is a way to collect extra income on stocks you already own. Since my last update, I executed one new covered call trade:

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#091 : 2017-07-01: Sold to Open 3 Contracts of Option GE Sep 15 2017 33.00 C

I own 300 shares of General Electric Company (GE) at a cost basis of $31.00 per share. I'm willing to sell these shares for $33.00 on or before 15 September:

Open Date :  2017-07-01 Expiration Date :  2017-09-15     Number of Days in Trade :  76 Cost Basis :  $31.00 per share Gain at Strike Price :  6.45% Strike Price :  $33.00 per share Number of Contracts : 3 Number of Shares : 300 Call Premium :  $0.33 per share Options Income :  $98.50 Commission :  $0.99 Net Premium :  $0.325 per share Net Options Income :  $97.51 Options Yield :  1.05% Annualized Options Yield :  5.04% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $30.67 Gain if Exercised :  7.58%

This covered call yields 1.05%, or 5.04% on an annualized basis. The yield on cost of my GE position is 3.10%, so I'm boosting dividend income by a factor of 1.63. If the options are exercised, I'll sell 300 shares of GE at a reduced cost basis of $30.67 per share, for capital gains of 7.58%.

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For covered calls, I think an achievable goal is to double dividend income. The covered call trade on GE does not quite accomplish that goal.

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 six put contracts in this period:

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#092 : 2017-07-18: Sold to Open 1 Contract of Option AAPL Oct 20 2017 130.00 P

I'm willing to buy 100 shares of Apple Inc (AAPL) for $130.00 per share on or before 20 October. AAPL closed at $150.08 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2017-10-20     Number of Days in Trade :  94 Price at Close :  $150.08 per share Discount at Strike Price :  13.38% Strike Price :  $130.00 per share Number of Contracts : 1 Number of Shares : 100 Put Premium :  $1.14 per share Options Income :  $114.00 Commission :  -$1.00 Net Premium :  $1.150 per share Net Options Income :  $115.00 Options Yield :  0.77% Annualized Options Yield :  2.98% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $128.85 Discount if Exercised :  14.15%

This put option trade yields 0.77%, or 2.98% on an annualized basis. At $150.08 per share, AAPL yields 1.68%, so I'm boosting dividend income by a factor of 1.77. If the option is exercised, I'll buy 100 shares at a cost basis of $128.85 per share, a discount of 14.15%.

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#093 : 2017-07-18: Sold to Open 1 Contract of Option DIS Oct 20 2017 97.50 P

I'm willing to buy 100 shares of The Walt Disney Company (DIS) for $97.50 per share on or before 20 October. DIS closed at $105.75 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2017-10-20     Number of Days in Trade :  94 Price at Close :  $105.75 per share Discount at Strike Price :  7.80% Strike Price :  $97.50 per share Number of Contracts : 1 Number of Shares : 100 Put Premium :  $1.05 per share Options Income :  $105.00 Commission :  -$0.80 Net Premium :  $1.058 per share Net Options Income :  $105.80 Options Yield :  1.00% Annualized Options Yield :  3.89% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $96.44 Discount if Exercised :  8.80%

This put option trade yields 1.00%, or 3.89% on an annualized basis. At $105.75 per share, DIS yields 1.48%, so I'm boosting dividend income by a factor of 2.64. If the option is exercised, I'll buy 100 shares at a cost basis of $96.44 per share, a discount of 8.80%.

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#094 : 2017-07-18: Sold to Open 2 Contracts of Option SBUX Jan 19 2018 52.50 P

I'm willing to buy 200 shares of Starbucks Corporation (SBUX) for $52.50 per share on or before 19 January 2018. SBUX closed at $58.21 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2018-01-19     Number of Days in Trade :  185 Price at Close :  $58.21 per share Discount at Strike Price :  9.81% Strike Price :  $52.50 per share Number of Contracts : 2 Number of Shares : 200 Put Premium :  $1.23 per share Options Income :  $246.00 Commission :  -$1.00 Net Premium :  $1.235 per share Net Options Income :  $247.00 Options Yield :  2.12% Annualized Options Yield :  4.19% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $51.27 Discount if Exercised :  11.93%

This put option trade yields 2.12%, or 4.19% on an annualized basis. At $58.21 per share, SBUX yields 1.72%, so I'm boosting dividend income by a factor of 2.44. If the options are exercised, I'll buy 200 shares at a cost basis of $51.27 per share, a discount of 11.93%.

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#095 : 2017-07-18: Sold to Open 1 Contract of Option TXN Jan 19 2018 75.00 P

I'm willing to buy 100 shares of Texas Instruments Inc (TXN) for $75.00 per share on or before 19 January 2018. TXN closed at $82.16 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2018-01-19     Number of Days in Trade :  185 Price at Close :  $82.16 per share Discount at Strike Price :  8.71% Strike Price :  $75.00 per share Number of Contracts : 1 Number of Shares : 100 Put Premium :  $1.34 per share Options Income :  $134.00 Commission :  -$0.80 Net Premium :  $1.348 per share Net Options Income :  $134.80 Options Yield :  1.64% Annualized Options Yield :  3.24% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $73.65 Discount if Exercised :  10.36%

This put option trade yields 1.64%, or 3.24% on an annualized basis. At $82.16 per share, TXN yields 2.43%, so I'm boosting dividend income by a factor of 1.33. If the option is exercised, I'll buy 100 shares at a cost basis of $73.65 per share, a discount of 10.36%.

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#096 : 2017-07-18: Sold to Open 2 Contracts of Option WBA Aug 25 2017 75.00 P

I'm willing to buy 200 shares of Walgreens Boots Alliance, Inc (WBA) for $75.00 per share on or before 2 August. WBA closed at $78.67 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2017-08-02     Number of Days in Trade :  15 Price at Close :  $78.67 per share Discount at Strike Price :  4.67% Strike Price :  $75.00 per share Number of Contracts : 2 Number of Shares : 200 Put Premium :  $0.65 per share Options Income :  $130.00 Commission :  -$0.99 Net Premium :  $0.655 per share Net Options Income :  $130.99 Options Yield :  0.83% Annualized Options Yield :  20.27% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $74.35 Discount if Exercised :  5.50%

This put option trade yields 0.83%, or 20.27% on an annualized basis. At $78.67 per share, WBA yields 2.03%, so I'm boosting dividend income by a factor of 9.97. If the options are exercised, I'll buy 200 shares at a cost basis of $74.35 per share, a discount of 5.50%.

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#097 : 2017-07-18: Sold to Open 3 Contracts of Option WFC Sep 15 2017 52.50 P

I'm willing to buy 300 shares of Wells Fargo & Co (WFC) for $52.50 per share on or before 15 September. WFC closed at $54.80 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2017-09-15     Number of Days in Trade :  59 Price at Close :  $54.80 per share Discount at Strike Price :  4.20% Strike Price :  $52.50 per share Number of Contracts : 3 Number of Shares : 300 Put Premium :  $0.74 per share Options Income :  $222.00 Commission :  -$2.58 Net Premium :  $0.749 per share Net Options Income :  $224.58 Options Yield :  1.37% Annualized Options Yield :  8.46% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $51.75 Discount if Exercised :  5.56%

This put option trade yields 1.37%, or 8.46% on an annualized basis. At $54.80 per share, WFC yields 2.85%, so I'm boosting dividend income by a factor of 2.97. If the options are exercised, I'll buy 300 shares at a cost basis of $51.75 per share, a discount of 5.56%.

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#098 : 2017-07-18: Sold to Open 3 Contracts of Option NKE Sep 15 2017 50.00 P

I'm willing to buy 300 shares of Nike Inc (NKE) for $50.00 per share on or before 15 September. NKE closed at $57.65 per share on the date of my trade:

Open Date :  2017-07-18 Expiration Date :  2017-09-15     Number of Days in Trade :  59 Price at Close :  $57.65 per share Discount at Strike Price :  13.27% Strike Price :  $50.00 per share Number of Contracts : 3 Number of Shares : 300 Put Premium :  $1.00 per share Options Income :  $301.00 Commission :  -$3.85 Net Premium :  $1.016 per share Net Options Income :  $304.85 Options Yield :  1.76% Annualized Options Yield :  10.91% ----------------------------   --------------------- -------------------------------   ----------- Commission if Exercised :  $0.00 Cost Basis if Exercised :  $48.98 Discount if Exercised :  15.03%

This put option trade yields 1.76%, or 10.91% on an annualized basis. At $57.65 per share, NKE yields 1.25%, so I'm boosting dividend income by a factor of 8.74. If the options are exercised, I'll buy 300 shares at a cost basis of $48.98 per share, a discount of 15.03%.

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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%. My put trades on DIS and WFC do not quite measure up.

Options Expiring in July

The following options expire in August, so I'll be monitoring these closely:

#096 : 2	x	WBA 25 Aug 2017 WBA 75.00 P	::	Closed at $81.05 on 3 Aug (8.1% safety margin)
#087:  5	x	BAC 18 Aug 2017 BAC 22.00 P	::	Closed at $24.37 on 3 Aug (10.8% safety margin)
#082 : 1	x	CVS 18 Aug 2017 75.00 P	::	Closed at $78.60 on 3 Aug (4.8% safety margin)
#080 : 1	x	OC 18 Aug 2017 60.00 P	::	Closed at $66.74 on 3 Aug (11.2% safety margin)
#068 : 2	x	CSCO 18 Aug 2017 31.00 P	::	Closed at $31.56 on 3 Aug (1.8% safety margin)

Cisco Sysems, Inc (CSCO) is trading just 1.8% above the $31 strike price of the put options I sold. I'll need to monitor the share prices of these underlying stocks as the expiration date approaches and take appropriate action as needed.

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
#101	2017-07-18	:	3	×	PFE 15 Dec 2017 $34.00 C	$    210.00	( $        -2.39 )		$ 16,405.73	➤ $ 8,784.73
#100	2017-07-18	:	2	×	LOW 19 Jan 2018 $75.00 P	$    830.00	( $        -2.59 )		$ 16,198.12	➤ $ 8,787.12
#099	2017-07-18	:	3	×	GE 18 Jun 2018 $30.00 C	$    153.00	( $        -2.09 )		$ 15,370.71	➤ $ 8,789.71
#098	2017-07-18	:	3	×	NKE 19 Jan 2018 $50.00 P	$    301.00	( $        -3.85 )		$ 15,219.80	➤ $ 8,791.80
#097	2017-07-18	:	3	×	WFC 15 Sep 2017 $52.50 P	$    222.00	( $        -2.58 )		$ 14,922.65	➤ $ 8,795.65
#096	2017-07-18	:	2	×	WBA 25 Aug 2017 $75.00 P	$    130.00	( $        -0.99 )		$ 14,703.23	➤ $ 8,798.23
#095	2017-07-18	:	1	×	TXN 20 Oct 2017 $75.00 P	$    134.00	( $        -0.80 )		$ 14,574.22	➤ $ 8,799.22
#094	2017-07-18	:	2	×	SBUX 19 Jan 2018 $52.50 P	$    246.00	( $        -1.00 )		$ 14,441.02	➤ $ 8,800.02
#093	2017-07-18	:	1	×	DIS 20 Oct 2017 $97.50 P	$    105.00	( $        -0.80 )		$ 14,196.02	➤ $ 8,801.02
#092	2017-07-18	:	1	×	AAPL 20 Oct 2018 $130.00 P	$    114.00	( $        -1.00 )		$ 14,091.82	➤ $ 8,801.82
#091	2017-07-01	:	3	×	GE 15 Sep 2017 $33.00 C	$      98.50	( $        -4.97 )	→ #099	$ 13,978.82	➤ $ 8,802.82
#090	2017-06-21	:	2	×	TGT 19 Jan 2018 $65.00 C	$      76.00	( $        -1.97 )		$ 13,885.29	➤ $ 8,709.29
#089	2017-06-21	:	2	×	INTC 20 Oct 2017 $36.00 C	$    152.00	( $        -0.99 )		$ 13,811.26	➤ $ 8,711.26
#088	2017-06-21	:	20	×	F 15 Sep 2017 $12.00 C	$    220.00	( $      -25.81 )		$ 13,660.25	➤ $ 8,712.25
#087	2017-06-21	:	5	×	BAC 18 Aug 2017 $22.00 P	$    190.00	( $        -6.48 )		$ 13,466.06	➤ $ 8,738.06
#086	2017-06-16	:	2	×	WMT 15 Sep 2017 $70.00 P	$    246.00	( $        -1.00 )		$ 13,282.54	➤ $ 8,744.54
#085	2017-06-16	:	1	×	VLO 15 Dec 2017 $70.00 C	$    230.00	( $        -0.80 )		$ 13,037.54	➤ $ 8,745.54
#084	2017-06-16	:	2	×	TGT 20 Oct 2017 $45.00 P	$    248.00	( $        -1.00 )		$ 12,808.34	➤ $ 8,746.34
#083	2017-06-16	:	3	×	PPL 20 Oct 2017 $37.00 P	$    147.00	( $        -0.11 )		$ 12,561.34	➤ $ 8,747.34
#082	2017-06-16	:	1	×	CVS 18 Aug 2017 $75.00 P	$    222.00	( $        -0.80 )		$ 12,414.45	➤ $ 8,747.45
#081	2017-06-16	:	2	×	AXP 21 Jul 2017 $80.00 P	$    266.00	( $        -1.00 )		$ 12,193.25	➤ $ 8,748.25
#080	2017-05-12	:	1	×	OC 18 Aug 2017 $60.00 P	$    210.00	( $        -1.95 )		$ 11,928.25	➤ $ 8,483.25
#079	2017-05-12	:	2	×	KO 19 Jan 2018 $45.00 C	$    200.00	( $        -3.13 )		$ 11,720.20	➤ $ 8,485.20
#078	2017-05-12	:	2	×	DIS 15 Dec 2017 $110.00 C	$ 1,090.00	( $        -1.01 )		$ 11,523.33	➤ $ 8,488.33
#077	2017-05-12	:	2	×	ABBV 15 Sep 2017 $67.50 C	$    408.00	( $        -1.60 )		$ 10,434.34	➤ $ 8,489.34
#076	2017-04-21	:	2	×	LOW 21 Jul 2017 $80.00 P	$    408.00	( $    -743.57 )	→ #100	$ 10,027.94	➤ $ 8,490.94
#075	2017-04-21	:	3	×	INTC 16 Jun 2017 $35.00 P	$    189.00	( $        -3.86 )		$ 10,363.51	➤ $ 8,826.51
#074	2017-04-21	:	2	×	GILD 15 Sep 2017 $75.00 C	$    210.00	( $        -1.59 )		$ 10,178.37	➤ $ 8,641.37
#073	2017-04-21	:	20	×	F 16 Jun 2017 $12.00 C	$    320.00	( $        -9.11 )		$ 9,969.96	➤ $ 8,642.96
#072	2017-04-21	:	1	×	D 20 Oct 2017 $77.50 C	$    323.00	( $        -0.35 )		$ 9,659.07	➤ $ 8,332.07
#071	2017-04-21	:	5	×	BAC 21 Jul 2017 $20.00 P	$    160.00	( $        -2.28 )		$ 9,336.42	➤ $ 8,332.42
#070	2017-04-04	:	1	×	XOM 19 May 2017 $80.00 P	$    116.00	( $        -1.00 )		$ 9,178.70	➤ $ 8,174.70
#069	2017-04-04	:	2	×	INTC 19 May 2017 $36.00 P	$    192.00	( $        -0.99 )		$ 9,063.70	➤ $ 8,059.70
#068	2017-04-04	:	2	×	CSCO 18 Aug 2017 $31.00 P	$    146.00	( $        -0.99 )		$ 8,872.69	➤ $ 7,868.69
#067	2017-04-03	:	1	×	HRL 15 Sep 2017 $37.50 C	$      84.00	( $        -1.10 )		$ 8,727.68	➤ $ 7,869.68
#066	2017-04-03	:	1	×	CSCO 20 Oct 2017 $33.00 C	$    189.00	( $        -1.59 )		$ 8,644.78	➤ $ 7,870.78
#065	2017-03-20	:	1	×	WBA 21 Apr 2017 $84.00 P	$    184.00	( $        -1.10 )		$ 8,457.37	➤ $ 7,872.37
#064	2017-03-17	:	1	×	TGT 19 Jan 2018 $65.00 C	$      93.00	( $        -1.10 )		$ 8,274.47	➤ $ 7,689.47
#063	2017-03-17	:	1	×	PG 15 Dec 2017 $90.00 C	$    492.00	( $        -1.11 )		$ 8,182.57	➤ $ 7,690.57
#062	2017-03-17	:	2	×	PFE 15 Sep 2017 $35.00 C	$    220.00	( $      -22.57 )	→ #101	$ 7,691.68	➤ $ 7,691.68
#061	2017-02-24	:	1	×	TGT 20 Oct 2017 $75.00 C	$    157.00	( $        -5.68 )	→ #064	$ 7,494.25	➤ $ 7,494.25
#060	2017-02-24	:	2	×	QCOM 21 Jul 2017 $57.50 C	$    580.00	( $    -123.57 )		$ 7,342.93	➤ $ 7,342.93
#059	2017-02-24	:	2	×	QCOM 21 Jul 2017 $57.50 C	$    573.00	( $    -123.07 )		$ 6,886.50	➤ $ 6,886.50
#058	2017-02-24	:	1	×	PFE 15 Sep 2017 $35.00 C	$    113.00	( $      -12.09 )	→ #101	$ 6,436.57	➤ $ 6,436.57
#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

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:	$ 16,406		$   8,785
Last Month:	$ 14,905		$   7,409
Difference:	$   1,501		$   1,376

I started 2017 with $2,512 in secured options income, so with $8,785 secured through July 2017, I've earned $6,273 in options income. This is 74.7% of my options income goal of $8,400 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!