Wednesday, December 27, 2017

Options Update: December 2017

Welcome to my last options update article for 2017!

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

While DivGro is focused on investing in dividend growth stocks, I added options trading to the mix in June 2016. My goal is to generate options income and to use the money I collect to buy more dividend growth stocks. I sell covered calls on dividend growth stocks I own or secured puts on stocks I'd like to own.

Through December 2017, I've collected options income totaling $20,263.

With secured options income of $8,464 from January through November, I've achieved my 2017 goal of collecting $8,400 in options income. I count secured options income, which is options income without associated obligations.

December was a quiet month with no new options trades. However, two open put options expired in December, so I've secured an additional $443 in options income.

Below is a snapshot showing these trades and the current income totals. You can see all my options trades on DivGro's Options page, which automatically updates whenever I enter new trades.

Assigned Options


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

No options got assigned in December.

Expired Options


In December, two short put options expired:

#1022017-08-18:2×HRL 15 Dec 2017 $32.50 P $ 200.00 ( $ -0.11 )
#1222017-11-17:2×WBA 15 Dec 2017 $70.00 P $ 244.00 ( $ -0.99 )

On options expiration day, Hormel Foods (HRL) closed at $36.79, well above the put option's strike price of $32.50. I no longer have the obligation to buy 200 HRL shares at $32.50 per share.

On options expiration day, Walgreens Boots Alliance (WBA) closed at $71.94, well above the put option's strike price of $70. I no longer have the obligation to buy 200 WBA shares at $70 per share.

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.

I didn't close any options early in December. 

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.

No open options were rolled forward In December.

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 December.

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 did not sell any put contracts in December.

Options Expiring Next Month


The following options expire in January:

#1272017-11-30:2×EEM 19 Jan 2018 $46.00 P $ 234.00 ( $ -0.85 ) → Out of the money with a 1% safety margin
#1252017-11-21:3×X 19 Jan 2018 $26.00 P $ 252.00 ( $ -2.09 ) → Out of the money with a 35% safety margin
#1242017-11-21:2×RL 19 Jan 2018 $80.00 P $ 150.00 ( $ -0.09 ) → Out of the money with a 29% safety margin
#1232017-11-21:3×BAC 19 Jan 2018 $25.00 P $ 120.00 ( $ -2.23 ) → Out of the money with a 19% safety margin
#1182017-11-17:2×MO 19 Jan 2018 $62.50 P $ 140.00 ( $ -0.99 ) → Out of the money with a 15% safety margin
#1122017-09-14:1×WFC 19 Jan 2018 $50.00 P $ 166.00 ( $ -1.59 ) → Out of the money with a 22% safety margin
#1092017-08-30:2×WFC 19 Jan 2018 $50.00 P $ 364.00 ( $ -1.30 ) → Out of the money with a 22% safety margin
#1082017-08-30:2×TGT 19 Jan 2018 $50.00 P $ 336.00 ( $ -1.59 ) → Out of the money with a 32% safety margin
#0942017-07-18:2×SBUX 19 Jan 2018 $52.50 P $ 246.00 ( $ -1.00 ) → Out of the money with a 9% safety margin
#0792017-05-12:2×KO 19 Jan 2018 $45.00 C $ 200.00 ( $ -3.13 )→ In the money by 2%

I'll need to monitor a few of these options carefully in order to take the appropriate actions. In particular, the Coca-Cola (KO) covered call options are about 2% in the money, so I'll need to protect my shares by rolling forward the options. Also, the iShares MSCI Emerging Markets ETF (EEM) put options have a small margin of safety, and I don't really want to own the shares. I'll roll those forward if necessary.

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
#1272017-11-30:  2×EEM 19 Jan 2018 $46.00 P $    234.00 ( $        -0.85 )$ 20,263.12 ➤ $ 11,420.12 
#1262017-11-30:  2×BBT 16 Mar 2018 $46.00 P $    192.00 ( $        -0.99 )$ 20,029.97 ➤ $ 11,420.97 
#1252017-11-21:  3×X 19 Jan 2018 $26.00 P $    252.00 ( $        -2.09 )$ 19,838.96 ➤ $ 11,421.96 
#1242017-11-21:  2×RL 19 Jan 2018 $80.00 P $    150.00 ( $        -0.09 )$ 19,589.05 ➤ $ 11,424.05 
#1232017-11-21:  3×BAC 19 Jan 2018 $25.00 P $    120.00 ( $        -2.23 )$ 19,439.14 ➤ $ 11,424.14 
#1222017-11-17:  2×WBA 15 Dec 2017 $70.00 P $    244.00 ( $        -0.99 )$ 19,321.37 ➤ $ 11,426.37 
#1212017-11-17:  1×VLO 18 Jan 2019 $80.00 C $    892.00 ( $        -0.64 )$ 19,078.36 ➤ $ 11,183.36 
#1202017-11-17:  2×TXN 16 Mar 2018 $85.00 P $    200.00 ( $        -0.99 )$ 18,187.00 ➤ $ 11,184.00 
#1192017-11-17:  3×NKE 20 Apr 2018 $50.00 P $    208.00 ( $        -2.39 )$ 17,987.99 ➤ $ 11,184.99 
#1182017-11-17:  2×MO 19 Jan 2018 $62.50 P $    140.00 ( $        -0.99 )$ 17,782.38 ➤ $ 11,187.38 
#1172017-11-17:  2×AAPL 16 Feb 2018 $150.00 P $    376.00 ( $        -1.60 )$ 17,643.37 ➤ $ 11,188.37 
#1162017-10-20:  2×INTC 17 Jan 2020 $40.00 C $ 1,032.00 ( $        -1.01 )$ 17,268.97 ➤ $ 11,189.97 
#1152017-10-20:  1×DIS 15 Dec 2017 $95.00 P $    145.00 ( $      -17.59 )$ 16,237.98 ➤ $ 11,190.98 
#1142017-10-20:  1×D 20 Apr 2018 $80.00 C $    253.00 ( $        -0.35 )$ 16,110.57 ➤ $ 11,063.57 
#1132017-09-27:  2×VLO 17 Nov 2017 $70.00 P $    162.00 ( $        -0.99 )$ 15,857.92 ➤ $ 11,063.92 
#1122017-09-14:  1×WFC 19 Jan 2018 $50.00 P $    166.00 ( $        -1.59 )$ 15,696.91 ➤ $ 10,902.91 
#1112017-09-14:  2×AAPL 15 Dec 2017 $135.00 P $    203.00 ( $      -14.17 )→ #117$ 15,532.50 ➤ $ 10,904.50 
#1102017-08-30:  2×WMT 15 Dec 2017 $75.00 P $    314.00 ( $        -7.15 )$ 15,343.67 ➤ $ 10,715.67 
#1092017-08-30:  2×WFC 19 Jan 2018 $50.00 P $    364.00 ( $        -1.30 )$ 15,036.82 ➤ $ 10,408.82 
#1082017-08-30:  2×TGT 19 Jan 2018 $50.00 P $    336.00 ( $        -1.59 )$ 14,674.12 ➤ $ 10,410.12 
#1072017-08-30:  4×QCOM 20 Apr 2018 $60.00 C $    524.00 ( $        -1.99 )$ 14,339.71 ➤ $ 10,411.71 
#1062017-08-30:  2×GILD 15 Feb 2018 $80.00 C $    923.00 ( $        -1.91 )$ 13,817.70 ➤ $ 10,413.70 
#1052017-08-30:20×F 16 Mar 2018 $12.00 C $    480.00 ( $      -25.68 )$ 12,896.61 ➤ $ 10,415.61 
#1042017-08-30:  3×CSCO 16 Feb 2018 $34.00 C $    182.00 ( $        -2.38 )$ 12,442.29 ➤ $ 10,441.29 
#1032017-08-30:  2×ABBV 15 Jun 2018 $70.00 C $ 1,373.00 ( $        -1.32 )$ 12,262.67 ➤ $ 10,443.67 
#1022017-08-18:  2×HRL 15 Dec 2017 $32.50 P $    200.00 ( $        -0.11 )$ 10,890.99 ➤ $ 10,444.99 
#1012017-07-18:  3×PFE 15 Dec 2017 $34.00 C $    210.00 ( $        -2.39 )$ 10,691.10 ➤ $ 10,245.10 
#1002017-07-18:  2×LOW 19 Jan 2018 $75.00 P $    830.00 ( $    -113.67 )$ 10,483.49 ➤ $ 10,037.49 
#0992017-07-18:  3×GE 18 Jun 2018 $30.00 C $    153.00 ( $      -12.21 )$ 9,767.16 ➤ $ 9,321.16 
#0982017-07-18:  3×NKE 19 Jan 2018 $50.00 P $    301.00 ( $      -79.22 )→ #119$ 9,626.37 ➤ $ 9,180.37 
#0972017-07-18:  3×WFC 15 Sep 2017 $52.50 P $    222.00 ( $    -364.44 )→ #112$ 9,404.59 ➤ $ 8,958.59 
#0962017-07-18:  2×WBA 25 Aug 2017 $75.00 P $    130.00 ( $        -0.99 )$ 9,547.03 ➤ $ 9,101.03 
#0952017-07-18:  1×TXN 20 Oct 2017 $75.00 P $    134.00 ( $        -6.89 )$ 9,418.02 ➤ $ 8,972.02 
#0942017-07-18:  2×SBUX 19 Jan 2018 $52.50 P $    246.00 ( $        -1.00 )$ 9,290.91 ➤ $ 8,844.91 
#0932017-07-18:  1×DIS 20 Oct 2017 $97.50 P $    105.00 ( $        -0.80 )$ 9,045.91 ➤ $ 8,845.91 
#0922017-07-18:  1×AAPL 20 Oct 2018 $130.00 P $    114.00 ( $        -8.04 )$ 8,941.71 ➤ $ 8,741.71 
#0912017-07-01:  3×GE 15 Sep 2017 $33.00 C $      98.50 ( $        -4.97 )→ #099$ 8,835.75 ➤ $ 8,635.75 
#0902017-06-21:  2×TGT 19 Jan 2018 $65.00 C $      76.00 ( $    -235.55 )$ 8,742.22 ➤ $ 8,542.22 
#0892017-06-21:  2×INTC 20 Oct 2017 $36.00 C $    152.00 ( $    -853.97 )→ #116$ 8,901.77 ➤ $ 8,701.77 
#0882017-06-21:20×F 15 Sep 2017 $12.00 C $    220.00 ( $      -62.44 )→ #105$ 9,603.74 ➤ $ 9,403.74 
#0872017-06-21:  5×BAC 18 Aug 2017 $22.00 P $    190.00 ( $        -6.48 )$ 9,446.18 ➤ $ 9,246.18 
#0862017-06-16:  2×WMT 15 Sep 2017 $70.00 P $    246.00 ( $        -9.16 )→ #110$ 9,262.66 ➤ $ 9,062.66 
#0852017-06-16:  1×VLO 15 Dec 2017 $70.00 C $    230.00 ( $ -1,211.42 )→ #121$ 9,025.82 ➤ $ 8,825.82 
#0842017-06-16:  2×TGT 20 Oct 2017 $45.00 P $    248.00 ( $      -22.58 )→ #108$ 10,007.24 ➤ $ 9,807.24 
#0832017-06-16:  3×PPL 20 Oct 2017 $37.00 P $    147.00 ( $      -32.48 )$ 9,781.82 ➤ $ 9,581.82 
#0822017-06-16:  1×CVS 18 Aug 2017 $75.00 P $    222.00 ( $        -0.80 )$ 9,667.30 ➤ $ 9,467.30 
#0812017-06-16:  2×AXP 21 Jul 2017 $80.00 P $    266.00 ( $        -1.00 )$ 9,446.10 ➤ $ 9,246.10 
#0802017-05-12:  1×OC 18 Aug 2017 $60.00 P $    210.00 ( $        -1.95 )$ 9,181.10 ➤ $ 8,981.10 
#0792017-05-12:  2×KO 19 Jan 2018 $45.00 C $    200.00 ( $        -3.13 )$ 8,973.05 ➤ $ 8,773.05 
#0782017-05-12:  2×DIS 15 Dec 2017 $110.00 C $ 1,090.00 ( $      -83.99 )$ 8,776.18 ➤ $ 8,776.18 
#0772017-05-12:  2×ABBV 15 Sep 2017 $67.50 C $    408.00 ( $ -1,295.88 )→ #103$ 7,770.17 ➤ $ 7,770.17 
#0762017-04-21:  2×LOW 21 Jul 2017 $80.00 P $    408.00 ( $    -743.57 )→ #100$ 8,658.05 ➤ $ 8,658.05 
#0752017-04-21:  3×INTC 16 Jun 2017 $35.00 P $    189.00 ( $        -3.86 )$ 8,993.62 ➤ $ 8,993.62 
#0742017-04-21:  2×GILD 15 Sep 2017 $75.00 C $    210.00 ( $    -949.47 )→ #106$ 8,808.48 ➤ $ 8,808.48 
#0732017-04-21:20×F 16 Jun 2017 $12.00 C $    320.00 ( $        -9.11 )$ 9,547.95 ➤ $ 9,547.95 
#0722017-04-21:  1×D 20 Oct 2017 $77.50 C $    323.00 ( $    -220.69 )→ #114$ 9,237.06 ➤ $ 9,237.06 
#0712017-04-21:  5×BAC 21 Jul 2017 $20.00 P $    160.00 ( $        -2.28 )$ 9,134.75 ➤ $ 9,134.75 

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:
$ 20,263$ 11,420
Last Month:
$ 20,263$ 10,976
Difference:
$          0$      444

I started 2017 with $2,512 in secured options income, so with $11,420 secured through December 2017, I've earned $8,908 in options income. This is 106% of my options income goal of $8,400 for 2017.

In 2018, I'm hoping to grow DivGro's options trading activity significantly and to secure $12,000 in options income throughout the year. To do so, I'm planning to transfer one of my FolioInvesting accounts to Interactive Brokers to enhance my ability to trade options. The $12,000 goal represents an increase of 43%, which will be quite a stretch, but I'm looking forward to the challenge!

Take care everybody and thanks for reading!

I hope you find these Options Update articles informative. I continue to consider myself a learning 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!

14 comments :

  1. Awesome stuff Ferdi. Over your goal for the year and with 1 month to spare. And I'm glad to see you boosting that target up for next year. 2017 has been a great year for me with options with over $17k of profits YTD plus some capital gains to boot. It's still very much in the proof of concept stage, but if year 1 is a precursor for what's to come then FI might be closer than I expected.

    ReplyDelete
    Replies
    1. Thanks, Passive IncomePursuit. I worked hard on my options trading in November because I new I would be traveling in December with little appetite for trading. As for 2018, I'm looking forward to the challenge of increasing my secured income goal by 43%. I'm very impressed with the profits you've made from options -- congratulations and keep up the great work!

      Delete
  2. Wow, FerdiS, December was truly a quiet month for you on the options front. However, you deserve a break after surpassing your 2017 options income goal already. Congrats!
    January income looks quite promising though with regard to expiring contracts. So, 2018 could get off to a good start. You've got an impressive 2018 goal... I'll be rooting for you to eclipse the mark you've set. Take care.

    ReplyDelete
    Replies
    1. Yes, December was very quiet -- as mentioned above, I knew I would be traveling in December so I finished my options trading in November (and achieved my 2017 options income goals to boot!)

      I'm excited to see what 2018 brings on the options front. With a 43% increase in my goal, I have my work cut out for myself. January will be a good start with so many options expiring.

      Thanks and all the best to you for 2018!

      Delete
  3. Thanks for writing these. They make learning about options easier. Once I get my portfolio to a good level I hope to start options as well. Great way to boost dividend income...
    DFG

    ReplyDelete
    Replies
    1. You're welcome, Dividend Family Guy... all the best with growing your portfolio! It sure makes a difference to my portfolio to be able to sell covered calls and secured puts. The additional income can be deployed to buy more dividend growth stocks, allowing the dividend snowball to grow even faster.

      Delete
  4. Hi!
    Why did not you buy the stock at 32.5 or below?
    In the period 2017-08-18 - 2017-12-17 the price dropped to 29.75

    ReplyDelete
    Replies
    1. I own shares of HRL already. The $32.50 put I sold earned me about $200 in extra income.

      Delete
  5. Previous question on HRL.
    Next WBA:
    Why did not you buy the stock at 70 or below?
    In the period 2017-11-17 - 2017-12-17 the price dropped to 63.82

    holder non exercises an option ?

    ReplyDelete
    Replies
    1. As a seller of options, I don't have any say in whether an option gets exercised or not. From the option buyer's point of view, though, perhaps they wanted to retain their shares anticipating the run-up or not wanting to register a short-term capital gain. I really don't know.

      Delete
  6. Nice job Ferdi. I like the discipline and fact you kept it simple and limited "options" to selling pure premium. I guess raising market certainly helped with all that put selling.

    Wondering
    - about your selection process each month.
    - would you stick to the same or change your strategies in 2018 or in a bear market (more calla than puts?)


    Good luck with your 2018 goal.

    -srini

    ReplyDelete
    Replies
    1. Hi, Srini -- thanks for your comment and questions. For covered calls, I mostly stick with positions I already own (and have at least 100 shares of). Only on rare occasions would I open a new position with a covered call trade, especially with the market trading near all-time highs.

      As for puts, there are two cases. One is where a stock is trading at or just above fair value. Then I try to set a strike price that, along with the premium, would allow me to enter a position below fair value. The other is where a stock is trading well above fair value. While I'd like to own shares, I don't want to pay the premium. So, I sell deep out of the money puts with a longer time to expiration, which I consider to be a "dividend" on the cash set aside to cover the put.

      I'll mostly stick to these strategies until evidence of a bear market becomes clear.

      Delete
  7. Thanks Ferdi. I like the way you are looking at it as 'dividend', while waiting..

    When selling premium, do you wait for volatility to raise Or mainly focus on value 'if assigned' price?

    ReplyDelete
    Replies
    1. I don't wait for volatility to rise. If I can sell a covered call at a strike price above my cost basis, then I usually execute the trade. Sometimes, I have to go out quite far to get a reasonable premium. Perhaps waiting for higher volatility would be better.

      Delete

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