Friday, July 20, 2018

Options Update: June 2018 (Part 1)

I added options trading to DivGro in June 2016 to leverage the equity in my portfolio and to generate additional income.

The purpose of these monthly options update articles is to report my options trades and to keep track of the options income so generated.

With lots of trading activity in June, I decided to split this update into two parts. Part 1 provides the usual recap and a snapshot of June's trades. I report on expired, closed, and rolled options, and review a list of options that expire soon. Part 1 concludes with a look at how I'm doing with regards to my secured options income goal.

Part 2 will provide details on new covered call and put contracts, as well as a spread trade I executed last month. I'll also provide the usual running tally of the total amount I received from options trades, as well as the options premiums secured due to options that expired.

Before getting into some of last month's trades, let's do a quick recap.

Recap


I consider options income secured if I no longer have any obligations to fulfill. Specifically, if I close an option or if an option expires, I no longer have an obligation to fulfill. Similarly, if an option is assigned, my obligation "expires" at assignment.

My options goal for 2018 is to secure at least $12,000 in options income. This is a challenging goal that represents an increase of about 43% over the amount I secured in 2017. Given the increased market volatility since February, I had to execute some defensive trades that cost me some of my previously secured options income.

Additionally, I've started experimenting with options spreads, which also "cost" me some of my previously secured options income. The bottom line is that my secured options income is down significantly from where I started in January, so my goal of securing at least $12,000 in options income in 2018 is very far away.

The following snapshot shows the trades I executed in June. You can see all my options trades on a new options page that automatically updates whenever I enter new trades.


Assigned Options


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

I didn't have any options assignments in June.

Expired Options


In June, the following options expired:


#1852018-05-24:-2×HSY 15 Jun 2018 $91.00 P $ 236.00 ( $ -0.74 )
#1642018-03-14:-3×PFE 15 Jun 2018 $34.00 P $ 150.00 ( $ -1.47 )
#1482018-02-23:-2×HRL 15 Jun 2018 $32.50 P $ 304.00 ( $ -0.01 )

I secured options income of $687.78 due to these expirations.

On 15 June, Hershey (HSY) closed at $94 per share, 3.3% above the $91 put strike price. The puts expired and I no longer have the obligation to buy 200 HSY shares. I secured $235.26.

On 15 June, Pfizer (PFE) closed at $36.36 per share, 6.9% above the $34 put strike price. The puts expired and I no longer have the obligation to buy 300 PFE shares. I secured $148.53.

On 15 June, Hormel Foods (HRL) closed at $36.26 per share, 11.6% above the $32.50 put strike price. The puts expired and I no longer have the obligation to buy 200 HRL shares. I secured $303.99.

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.

#1322018-01-10:-2×KO 18 Jan 2019 $47.00 C $ 414.00 ( $ -109.56 )

On 21 June, Coca-Cola (KO) closed at $43.09 per share. The $47 June calls were deep in the money, so I decided to close them early. The trade secured $304.44.

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.

Here are the options I rolled forward in June:

#2082018-06-14:-2×TGT 19 Oct 2018 $70.00 P $    355.00 ( $        -0.81 )
#1862018-05-24:-2×TGT 20 Jul 2018 $67.50 P $    224.00 ( $      -32.79 )→ #208
#2072018-06-14:-3×NKE 19 Oct 2018 $65.00 P $    264.00 ( $        -0.96 )
#1432018-02-16:-3×NKE 20 Jul 2018 $60.00 P $    441.00 ( $      -20.73 )→ #207
#2062018-06-14:-20×F 18 Jan 2019 $12.00 C $ 1,383.00 ( $      -15.81 )
#1332018-01-10:-20×F 17 Jan 2020 $12.00 C $ 3,720.00 ( $ -2,558.96 )→ #206

On 14 June, Target (TGT) closed at $77.25 per share, so my $67.50 put option was deep in the money. I decided to roll forward the option to October 2018 and simultaneously to increase the strike price to $70. In the process, I secured $191.21 and added $354.19 to my options income tally.

On 14 June, Nike (NKE) closed at $74.70 per share, so my $60 put option was deep in the money. I decided to roll forward the option to October 2018 and simultaneously to increase the strike price to $65. In the process, I secured $420.27 and added $263.04 to my options income tally.

On 14 June, Ford Motor (F) closed at $11.72 per share, so my $12 covered call was in the money. I decided to bring forward the option to January 2019, securing $1,161.04 in options income. The new obligation added $1,367.19 to my options income tally.


Options Expiring Soon


I look forward to expiring options, hopefully allowing me to secure more options income. Of course, for in the money options, I have decisions to make before the expiration date.

The following options expire in the next two months:

July:
#2112018-06-20:-1×HSY 20 Jul 2018 $92.00 P $ 194.00 ( $ -0.79 )  → At the money  
#1922018-06-14:-1×AAPL 20 Jul 2018 $200.00 C $ 122.00 ( $ -1.09 )→ Out of the money with an  4% safety margin  
#1912018-06-12:-2×TPR 20 Jul 2018 $45.00 P $ 140.00 ( $ -1.58 )→ Out of the money with an  7% safety margin  

August:
#1942018-06-14:-2×CMCSA 17 Aug 2018 $35.00 C $ 164.00 ( $ -1.58 )  → At the money  
#1892018-06-12:-2×AEO 17 Aug 2018 $24.00 P $ 180.00 ( $  0.00 )→ Out of the money with an  2% safety margin  
#1882018-05-24:-2×WSM 17 Aug 2018 $47.50 P $ 240.00 ( $ -0.08 )→ Out of the money with a  32% safety margin  

Two option are at the money. For July expiration, I'm rolling forward the HSY put option. For August expiration, I'll continue to closely monitor the CMCSA and AEO options as the expiration date approaches.

Goals Progress


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


Total
Options Income
Secured
Options Income
This Month:
$ 32,671$     5,108
Last Month:
$ 29,052$     2,593
Difference:
$   3,619$     2,515

I started 2018 with $11,420 in secured options income. Adding my 2018 goal of $12,000 in secured options income makes the target $23,420.

I'm happy to report some progress, but the road remains very steep indeed! I'll have to secure $18,312 in the second half of 2018 to achieve my secured options income goal for 2018!

Thanks for reading and take care, everybody!



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