Saturday, October 7, 2017

Options Update: September 2017

In June 2016, I started trading options for income by leveraging DivGro, my dividend growth portfolio. I sell covered calls and secured puts on dividend stocks I own or would like to own. The options income I collect flows back into DivGro, just like dividends. It provides extra cash to buy more dividend growth stocks.

I write monthly options update articles to keep track of my options trades. Each update serves as a status report on the open options and the obligations I have. I also report on new trades and I provide a running tally of DivGro's options income to date.

Through September 2017, I've collected options income totaling $18,773. Of that total, $10,135 is secured, meaning I no longer have any obligations to fulfill. That represents extra money I can use to buy dividend growth stocks.

In 2017, I'm aiming to earn at least $8,400 in options income. This month's secured income of $1,318 pushed me ever closer to my 2017 goal. With options income in 2017 totaling $7,623, I'm only $777 short of my 2017 goal!

Last month, I created a new spreadsheet to track my options trades. I also added a new options page to my DivGro blog that automatically updates whenever I enter new trades. Additionally, the spreadsheet automatically updates my options income tally and secured income totals:


The snapshot above shows the trades executed in September.

One option expired and I closed four options early. Additionally, I rolled forward one option and I sold two put options for income.

Assigned Options


No options were assigned in September.

Expired Options


In September, one short option expired:

#0672017-04-03:1×HRL 15 Sep 2017 $37.50 C $ 84.00 ( $ -1.10 )

On options expiration day, Hormel Foods (HRL) closed at $31.38, well below the covered call strike price of $37.50. The 100 shares of HRL in DivGro is now "uncovered", so I can sell another covered call for income.

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 September, I closed three put options and one call option early:

#0952017-07-18:1×TXN 20 Oct 2017 $75.00 P $    134.00 ( $   -6.89 )→ secured 95% of available income
#0922017-07-18:1×AAPL 20 Oct 2018 $130.00 P $    114.00 ( $   -8.04 )→ secured 93% of available income
#0832017-06-16:3×PPL 20 Oct 2017 $37.00 P $    147.00 ( $ -32.48 )→ secured 80% of available income
#0782017-05-12:2×DIS 15 Dec 2017 $110.00 C $ 1,090.00 ( $ -83.99 )→ secured 92% of available income

The cost of buying back the put options is shown in parentheses.

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 September, I rolled forward an option on Wells Fargo (WFC):

#0972017-07-18:3×WFC 15 Sep 2017 $52.50 P $ 222.00 ( $ -364.44 )→ #109
#1122017-09-14:1×WFC 19 Jan 2018 $50.00 P $ 166.00 ( $     -2.89 )

I decided to roll forward the WFC put option to January 2018 and also to drop the strike price to $50.

New Covered Calls


Selling covered calls is a way to collect extra income on stocks you already own. I did not sell any covered calls in September.

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 two put contracts in this period:

#111 : 2017-09-14: Sold to Open 2 Contracts of Option AAPL Dec 15 2017 135.00 P

I'm willing to buy 200 shares of Apple (AAPL) for $135.00 per share on or before 15 December. AAPL closed at $158.28 per share on the date of my trade:

Open Date :  2017-09-14
Expiration Date :  2017-12-15    Number of Days in Trade : 92
Price at Close :  $158.28 per shareDiscount at Strike Price : 14.71%
Strike Price :  $135.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $1.02 per shareOptions Income : $203.00
Commission : -$0.99
Net Premium :  $1.020 per shareNet Options Income : $203.99
Options Yield :  0.64%Annualized Options Yield : 2.56%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $133.98Discount if Exercised : 15.35%

This put option trade yields 0.64%, or 2.56% on an annualized basis. At $158.28 per share, AAPL yields 1.59%, so I'm boosting dividend income by a factor of 1.61. If the options are exercised, I'll buy 200 shares at a cost basis of $133.98 per share, a discount of 15.35%.


#113 : 2017-09-27: Sold to Open 2 Contracts of Option VLO Nov 17 2017 70.00 P

I'm willing to buy 200 shares of Valero Energy (VLO) for $70.00 per share on or before 17 November. VLO closed at $75.47 per share on the date of my trade:

Open Date :  2017-09-27
Expiration Date :  2017-11-17    Number of Days in Trade : 51
Price at Close :  $75.47 per shareDiscount at Strike Price : 7.25%
Strike Price :  $70.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.81 per shareOptions Income : $162.00
Commission : -$0.99
Net Premium :  $0.815 per shareNet Options Income : $162.99
Options Yield :  1.08%Annualized Options Yield : 7.73%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $69.19Discount if Exercised : 8.33%

This put option trade yields 1.08%, or 7.73% on an annualized basis. At $75.47 per share, VLO yields 3.71%, so I'm boosting dividend income by a factor of 2.08. If the options are exercised, I'll buy 200 shares at a cost basis of $69.19 per share, a discount of 8.33%.



For selling puts 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 discounts of 15.35% and 8.33%, these trades are reasonably what I hope to achieve.

Options Expiring Next Month


The following options expire in October, so I'll be monitoring them closely:

#0932017-07-18:1×DIS 20 Oct 2017 $97.50 P
:: Closed at $98.57 on 29 Sep (1% safety margin)
#0892017-06-21:2×INTC 20 Oct 2017 $36.00 C
:: Closed at $38.08 on 29 Sep (6% in the money)
#0722017-04-21:1×D 20 Oct 2017 $77.50 C
:: Closed at $76.93 on 30 Sep (1% safety margin)

Intel (INTC) is trading well above the $36.00 strike price, so I'll need to roll forward the options to avoid assignment.

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 

IDDATE:NO×TICKER OPTIONINCOME( EXPENSES )ROLLEDTOTAL➤ SECURED
#1132017-09-27:  2×VLO 17 Nov 2017 $70.00 P $    162.00 ( $        -0.99 )$ 18,773.35 ➤ $ 10,135.35 
#1122017-09-14:  1×WFC 19 Jan 2018 $50.00 P $    166.00 ( $        -1.59 )$ 18,612.34 ➤ $ 10,136.34 
#1112017-09-14:  2×AAPL 15 Dec 2017 $135.00 P $    203.00 ( $        -0.99 )$ 18,447.93 ➤ $ 10,137.93 
#1102017-08-30:  2×WMT 15 Dec 2017 $75.00 P $    314.00 ( $        -2.57 )$ 18,245.92 ➤ $ 10,138.92 
#1092017-08-30:  2×WFC 19 Jan 2018 $50.00 P $    364.00 ( $        -1.30 )$ 17,934.49 ➤ $ 10,141.49 
#1082017-08-30:  2×TGT 19 Jan 2018 $50.00 P $    336.00 ( $        -1.59 )$ 17,571.79 ➤ $ 10,142.79 
#1072017-08-30:  4×QCOM 20 Apr 2018 $60.00 C $    524.00 ( $        -1.99 )$ 17,237.38 ➤ $ 10,144.38 
#1062017-08-30:  2×GILD 15 Feb 2018 $80.00 C $    923.00 ( $        -1.91 )$ 16,715.37 ➤ $ 10,146.37 
#1052017-08-30:20×F 16 Mar 2018 $12.00 C $    480.00 ( $      -25.68 )$ 15,794.28 ➤ $ 10,148.28 
#1042017-08-30:  3×CSCO 16 Feb 2018 $34.00 C $    182.00 ( $        -2.38 )$ 15,339.96 ➤ $ 10,173.96 
#1032017-08-30:  2×ABBV 15 Jun 2018 $70.00 C $ 1,373.00 ( $        -1.32 )$ 15,160.34 ➤ $ 10,176.34 
#1022017-08-18:  2×HRL 15 Dec 2017 $32.50 P $    200.00 ( $        -0.11 )$ 13,788.66 ➤ $ 10,177.66 
#1012017-07-18:  3×PFE 15 Dec 2017 $34.00 C $    210.00 ( $        -2.39 )$ 13,588.77 ➤ $ 10,177.77 
#1002017-07-18:  2×LOW 19 Jan 2018 $75.00 P $    830.00 ( $        -2.59 )$ 13,381.16 ➤ $ 10,180.16 
#0992017-07-18:  3×GE 18 Jun 2018 $30.00 C $    153.00 ( $        -2.09 )$ 12,553.75 ➤ $ 10,182.75 
#0982017-07-18:  3×NKE 19 Jan 2018 $50.00 P $    301.00 ( $        -3.85 )$ 12,402.84 ➤ $ 10,184.84 
#0972017-07-18:  3×WFC 15 Sep 2017 $52.50 P $    222.00 ( $    -364.44 )→ #109$ 12,105.69 ➤ $ 10,188.69 
#0962017-07-18:  2×WBA 25 Aug 2017 $75.00 P $    130.00 ( $        -0.99 )$ 12,248.13 ➤ $ 10,331.13 
#0952017-07-18:  1×TXN 20 Oct 2017 $75.00 P $    134.00 ( $        -6.89 )$ 12,119.12 ➤ $ 10,202.12 
#0942017-07-18:  2×SBUX 19 Jan 2018 $52.50 P $    246.00 ( $        -1.00 )$ 11,992.01 ➤ $ 10,075.01 
#0932017-07-18:  1×DIS 20 Oct 2017 $97.50 P $    105.00 ( $        -0.80 )$ 11,747.01 ➤ $ 10,076.01 
#0922017-07-18:  1×AAPL 20 Oct 2018 $130.00 P $    114.00 ( $        -8.04 )$ 11,642.81 ➤ $ 10,076.81 
#0912017-07-01:  3×GE 15 Sep 2017 $33.00 C $      98.50 ( $        -4.97 )→ #099$ 11,536.85 ➤ $ 9,970.85 
#0902017-06-21:  2×TGT 19 Jan 2018 $65.00 C $      76.00 ( $        -1.97 )$ 11,443.32 ➤ $ 9,877.32 
#0892017-06-21:  2×INTC 20 Oct 2017 $36.00 C $    152.00 ( $        -0.99 )$ 11,369.29 ➤ $ 9,879.29 
#0882017-06-21:20×F 15 Sep 2017 $12.00 C $    220.00 ( $      -62.44 )→ #105$ 11,218.28 ➤ $ 9,880.28 
#0872017-06-21:  5×BAC 18 Aug 2017 $22.00 P $    190.00 ( $        -6.48 )$ 11,060.72 ➤ $ 9,722.72 
#0862017-06-16:  2×WMT 15 Sep 2017 $70.00 P $    246.00 ( $        -9.16 )→ #110$ 10,877.20 ➤ $ 9,539.20 
#0852017-06-16:  1×VLO 15 Dec 2017 $70.00 C $    230.00 ( $        -0.80 )$ 10,640.36 ➤ $ 9,302.36 
#0842017-06-16:  2×TGT 20 Oct 2017 $45.00 P $    248.00 ( $      -22.58 )→ #108$ 10,411.16 ➤ $ 9,303.16 
#0832017-06-16:  3×PPL 20 Oct 2017 $37.00 P $    147.00 ( $      -32.48 )$ 10,185.74 ➤ $ 9,077.74 
#0822017-06-16:  1×CVS 18 Aug 2017 $75.00 P $    222.00 ( $        -0.80 )$ 10,071.22 ➤ $ 8,963.22 
#0812017-06-16:  2×AXP 21 Jul 2017 $80.00 P $    266.00 ( $        -1.00 )$ 9,850.02 ➤ $ 8,742.02 
#0802017-05-12:  1×OC 18 Aug 2017 $60.00 P $    210.00 ( $        -1.95 )$ 9,585.02 ➤ $ 8,477.02 
#0792017-05-12:  2×KO 19 Jan 2018 $45.00 C $    200.00 ( $        -3.13 )$ 9,376.97 ➤ $ 8,268.97 
#0782017-05-12:  2×DIS 15 Dec 2017 $110.00 C $ 1,090.00 ( $      -83.99 )$ 9,180.10 ➤ $ 8,272.10 
#0772017-05-12:  2×ABBV 15 Sep 2017 $67.50 C $    408.00 ( $ -1,295.88 )→ #103$ 8,174.09 ➤ $ 7,266.09 
#0762017-04-21:  2×LOW 21 Jul 2017 $80.00 P $    408.00 ( $    -743.57 )→ #100$ 9,061.97 ➤ $ 8,153.97 
#0752017-04-21:  3×INTC 16 Jun 2017 $35.00 P $    189.00 ( $        -3.86 )$ 9,397.54 ➤ $ 8,489.54 
#0742017-04-21:  2×GILD 15 Sep 2017 $75.00 C $    210.00 ( $    -949.47 )→ #106$ 9,212.40 ➤ $ 8,304.40 
#0732017-04-21:20×F 16 Jun 2017 $12.00 C $    320.00 ( $        -9.11 )$ 9,951.87 ➤ $ 9,043.87 
#0722017-04-21:  1×D 20 Oct 2017 $77.50 C $    323.00 ( $        -0.35 )$ 9,640.98 ➤ $ 8,732.98 
#0712017-04-21:  5×BAC 21 Jul 2017 $20.00 P $    160.00 ( $        -2.28 )$ 9,318.33 ➤ $ 8,733.33 
#0702017-04-04:  1×XOM 19 May 2017 $80.00 P $    116.00 ( $        -1.00 )$ 9,160.61 ➤ $ 8,575.61 
#0692017-04-04:  2×INTC 19 May 2017 $36.00 P $    192.00 ( $        -0.99 )$ 9,045.61 ➤ $ 8,460.61 
#0682017-04-04:  2×CSCO 18 Aug 2017 $31.00 P $    146.00 ( $        -0.99 )$ 8,854.60 ➤ $ 8,269.60 
#0672017-04-03:  1×HRL 15 Sep 2017 $37.50 C $      84.00 ( $        -1.10 )$ 8,709.59 ➤ $ 8,124.59 
#0662017-04-03:  1×CSCO 20 Oct 2017 $33.00 C $    189.00 ( $      -19.68 )$ 8,626.69 ➤ $ 8,041.69 
#0652017-03-20:  1×WBA 21 Apr 2017 $84.00 P $    184.00 ( $        -1.10 )$ 8,457.37 ➤ $ 7,872.37 
#0642017-03-17:  1×TGT 19 Jan 2018 $65.00 C $      93.00 ( $        -1.10 )$ 8,274.47 ➤ $ 7,689.47 
#0632017-03-17:  1×PG 15 Dec 2017 $90.00 C $    492.00 ( $        -1.11 )$ 8,182.57 ➤ $ 7,690.57 
#0622017-03-17:  2×PFE 15 Sep 2017 $35.00 C $    220.00 ( $      -22.57 )→ #101$ 7,691.68 ➤ $ 7,691.68 
#0612017-02-24:  1×TGT 20 Oct 2017 $75.00 C $    157.00 ( $        -5.68 )→ #064$ 7,494.25 ➤ $ 7,494.25 
#0602017-02-24:  2×QCOM 21 Jul 2017 $57.50 C $    580.00 ( $    -123.57 )$ 7,342.93 ➤ $ 7,342.93 
#0592017-02-24:  2×QCOM 21 Jul 2017 $57.50 C $    573.00 ( $    -123.07 )$ 6,886.50 ➤ $ 6,886.50 
#0582017-02-24:  1×PFE 15 Sep 2017 $35.00 C $    113.00 ( $      -12.09 )→ #101$ 6,436.57 ➤ $ 6,436.57 
#0572017-02-24:  3×INTC 19 May 2017 $35.00 P $    270.00 ( $      -42.70 )$ 6,335.66 ➤ $ 6,335.66 
#0562017-02-24:10×F 16 Jun 2017 $13.00 C $    350.00 ( $      -47.99 )$ 6,108.36 ➤ $ 6,108.36 
#0552017-02-24:  2×CVS 19 May 2017 $75.00 P $    184.00 ( $        -0.99 )$ 5,806.35 ➤ $ 5,806.35 
#0542017-02-24:  2×ABBV 19 May 2017 $65.00 C $    194.00 ( $    -366.58 )→ #077$ 5,623.34 ➤ $ 5,623.34 
#0532017-02-10:  2×QCOM 17 Mar 2017 $55.00 C $    177.00 ( $    -374.58 )→ #059$ 5,795.92 ➤ $ 5,795.92 
#0522017-02-07:  2×QCOM 10 Feb 2017 $53.50 C $      42.00 ( $    -108.37 )→ #053$ 5,993.50 ➤ $ 5,993.50 
#0512017-01-26:  2×QCOM 17 Mar 2017 $52.50 P $    336.00 ( $      -42.58 )$ 6,059.87 ➤ $ 6,059.87 

key:  expired  •  closed  •  rolled  •  assigned  •  open 

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

Goals Progress


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


Total
Options Income
Secured
Options Income
This Month:
$ 18,773$ 10,135
Last Month:
$ 18,493$   8,817
Difference:
$      280$   1,318

I started 2017 with $2,512 in secured options income, so with $10,135 secured through September 2017, I've earned $7,623 in options income. This is 90.8% 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!

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