Friday, January 4, 2019

Options Update: December 2018 (Part 1)

Welcome to my final Options Update article of 2018. With these updates, I keep track of my options income, summarize trades, and provide a running tally of DivGro's options income to date.

December turned out to be a busy month for options trading. I sold many covered calls and also made some defensive trades, like closing options early and rolling some options forward.

With so many transactions to cover, I'm presenting the article in three parts. In Part 1, I'll cover new covered calls. In Part 2, I'll cover new put contracts and look at options expiring soon. Finally, Part 3 will present an options assignment,  some closing trades, and a few rolled options trades. In Part 3, I'll also review my 2018 options goal.

Introduction


According to most analysts, as of August 22, 2018, the current bull market has been the longest since World War 2. I'm working on the assumption that the bears will soon take over, though we could see some continued upside for many months to come. ("Soon" for me means in a year or so).

In fact, some strategists say that 2019 could be a very good year for stocks if the market's biggest concerns were to be resolved. These are the trade wars (particularly with China) and the Federal Reserve's rate hikes and shrinking of its balance sheet. But volatility is expected to remain high.

New Covered Calls


Selling covered calls is a way to collect extra income on stocks you already own.

Given increased volatility in the markets and with stock selling off, in December I decided to sell covered calls on most of my DivGro positions.

By selling covered calls, essentially, I'm saying I'd be happy to sell this stock at this price. If the market continues to trade down and turn bearish, these covered calls eventually will expire and I'll offset some of the associated (but unrealized) losses.

On the other hand, if the market bounces back, some of these covered calls could be exercised. That's a risk I'm willing to take. Of course, I can always roll the covered calls forward as a protective measure.

Below is a snapshot showing the covered call trades executed in December:



By selling covered calls, essentially, I'm saying I'd be happy to sell this stock at this price. If the market continues to trade down and turn bearish, these covered calls eventually will expire and I'll offset some of the associated (but unrealized) losses.

On the other hand, if the market bounces back, some of these covered calls could be exercised. That's a risk I'm willing to take. Of course, I have the option to roll forward covered calls as a protective measure, but doing so before assignment is not always possible.

AAPL, ABBV, AFL, D

#2562018-12-06:-1×AAPL 15 Feb 2019 $200.00 C $ 167.00 ( $ -0.79 )
#2572018-12-06:-2×ABBV 17 May 2019 $100.00 C $ 500.00 ( $ -1.58 )
#2582018-12-06:-1×AFL 17 May 2019 $45.00 C $ 160.00 ( $ -0.79 )
#2592018-12-06:-1×D 19 Jul 2019 $80.00 C $ 130.00 ( $ -0.34 )


#256 : 2018-12-06: Sold to Open 1 Contract of Option AAPL Feb 15 2019 200.00 C

I own 100 shares of Apple (AAPL) at a cost basis of $104.41 per share. I'm willing to sell these shares for $200.00 on or before 15 February:

Open Date :  2018-12-06
Expiration Date :  2019-02-15    Number of Days in Trade : 71
Cost Basis :  $104.41 per shareGain at Strike Price : 91.55%
Strike Price :  $200.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.67 per shareOptions Income : $167.00
Commission : -$0.79
Net Premium :  $1.662 per shareNet Options Income : $166.21
Options Yield :  1.59%Annualized Options Yield : 8.19%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $102.73Gain if Exercised : 94.68%

This covered call yields 1.59%, or 8.19% on an annualized basis. The yield on cost of my AAPL position is 2.80%, so I'm boosting dividend income by a factor of 2.93. If the option is exercised, I'll sell 100 shares of AAPL at a reduced cost basis of $102.73 per share, for capital gains of 94.68%.



#257 : 2018-12-06: Sold to Open 2 Contracts of Option ABBV May 17 2019 100.00 C

I own 200 shares of AbbVie (ABBV) at a cost basis of $61.61 per share. I'm willing to sell these shares for $100.00 on or before 17 May:

Open Date :  2018-12-06
Expiration Date :  2019-05-17    Number of Days in Trade : 162
Cost Basis :  $61.61 per shareGain at Strike Price : 62.31%
Strike Price :  $100.00 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $2.50 per shareOptions Income : $500.00
Commission : -$1.58
Net Premium :  $2.492 per shareNet Options Income : $498.42
Options Yield :  4.04%Annualized Options Yield : 9.12%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $59.10Gain if Exercised : 69.20%

This covered call yields 4.04%, or 9.12% on an annualized basis. The yield on cost of my ABBV position is 6.95%, so I'm boosting dividend income by a factor of 1.31. If the options are exercised, I'll sell 200 shares of ABBV at a reduced cost basis of $59.10 per share, for capital gains of 69.20%.



#258 : 2018-12-06: Sold to Open 1 Contract of Option AFL May 17 2019 45.00 C

I own 100 shares of Aflac (AFL) at a cost basis of $25.03 per share. I'm willing to sell these shares for $45.00 on or before 17 May:

Open Date :  2018-12-06
Expiration Date :  2019-05-17    Number of Days in Trade : 162
Cost Basis :  $25.03 per shareGain at Strike Price : 79.78%
Strike Price :  $45.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.60 per shareOptions Income : $160.00
Commission : -$0.79
Net Premium :  $1.592 per shareNet Options Income : $159.21
Options Yield :  6.36%Annualized Options Yield : 14.34%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $23.42Gain if Exercised : 92.13%

This covered call yields 6.36%, or 14.34% on an annualized basis. The yield on cost of my AFL position is 4.16%, so I'm boosting dividend income by a factor of 3.45. If the option is exercised, I'll sell 100 shares of AFL at a reduced cost basis of $23.42 per share, for capital gains of 92.13%.



#259 : 2018-12-06: Sold to Open 1 Contract of Option D Jul 19 2019 80.00 C

I own 100 shares of Dominion Resources (D) at a cost basis of $72.90 per share. I'm willing to sell these shares for $80.00 on or before 19 July:

Open Date :  2018-12-06
Expiration Date :  2019-07-19    Number of Days in Trade : 225
Cost Basis :  $72.90 per shareGain at Strike Price : 9.74%
Strike Price :  $80.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.30 per shareOptions Income : $130.00
Commission : -$0.34
Net Premium :  $1.297 per shareNet Options Income : $129.66
Options Yield :  1.78%Annualized Options Yield : 2.89%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $71.60Gain if Exercised : 11.74%

This covered call yields 1.78%, or 2.89% on an annualized basis. The yield on cost of my D position is 4.58%, so I'm boosting dividend income by a factor of 0.63. If the option is exercised, I'll sell 100 shares of D at a reduced cost basis of $71.60 per share, for capital gains of 11.74%.


For covered calls, I think an achievable goal is to earn double the dividend yield. The AAPL and AFL covered calls achieved this goal, but the ABBV and D covered calls did not.

DGX, ES, HRL, INTC

#2602018-12-06:-1×DGX 17 May 2019 $100.00 C $ 135.00 ( $ -0.34 )
#2612018-12-06:-1×ES 19 Jul 2019 $70.00 C $ 270.00 ( $ -0.34 )
#2622018-12-06:-1×HRL 21 Jun 2019 $50.00 C $ 110.00 ( $ -0.34 )
#2632018-12-06:-2×INTC 15 Feb 2019 $55.00 C $ 106.00 ( $ -2.53 )



#260 : 2018-12-06: Sold to Open 1 Contract of Option DGX May 17 2019 100.00 C

I own 100 shares of Quest Diagnostics (DGX) at a cost basis of $88.76 per share. I'm willing to sell these shares for $100.00 on or before 17 May:

Open Date :  2018-12-06
Expiration Date :  2019-05-17    Number of Days in Trade : 162
Cost Basis :  $88.76 per shareGain at Strike Price : 12.66%
Strike Price :  $100.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.35 per shareOptions Income : $135.00
Commission : -$0.34
Net Premium :  $1.347 per shareNet Options Income : $134.66
Options Yield :  1.52%Annualized Options Yield : 3.42%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $87.41Gain if Exercised : 14.41%

This covered call yields 1.52%, or 3.42% on an annualized basis. The yield on cost of my DGX position is 2.39%, so I'm boosting dividend income by a factor of 1.43. If the option is exercised, I'll sell 100 shares of DGX at a reduced cost basis of $87.41 per share, for capital gains of 14.41%.



#261 : 2018-12-06: Sold to Open 1 Contract of Option ES Jul 19 2019 70.00 C

I own 100 shares of Eversource Energy (ES) at a cost basis of $47.42 per share. I'm willing to sell these shares for $70.00 on or before 19 July:

Open Date :  2018-12-06
Expiration Date :  2019-07-19    Number of Days in Trade : 225
Cost Basis :  $47.42 per shareGain at Strike Price : 47.62%
Strike Price :  $70.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $2.70 per shareOptions Income : $270.00
Commission : -$0.34
Net Premium :  $2.697 per shareNet Options Income : $269.66
Options Yield :  5.69%Annualized Options Yield : 9.23%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $44.72Gain if Exercised : 56.54%

This covered call yields 5.69%, or 9.23% on an annualized basis. The yield on cost of my ES position is 4.26%, so I'm boosting dividend income by a factor of 2.17. If the option is exercised, I'll sell 100 shares of ES at a reduced cost basis of $44.72 per share, for capital gains of 56.54%.



#262 : 2018-12-06: Sold to Open 1 Contract of Option HRL Jun 21 2019 50.00 C

I own 100 shares of Hormel Foods (HRL) at a cost basis of $34.74 per share. I'm willing to sell these shares for $50.00 on or before 21 June:

Open Date :  2018-12-06
Expiration Date :  2019-06-21    Number of Days in Trade : 197
Cost Basis :  $34.74 per shareGain at Strike Price : 43.93%
Strike Price :  $50.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.10 per shareOptions Income : $110.00
Commission : -$0.34
Net Premium :  $1.097 per shareNet Options Income : $109.66
Options Yield :  3.16%Annualized Options Yield : 5.85%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $33.64Gain if Exercised : 48.65%

This covered call yields 3.16%, or 5.85% on an annualized basis. The yield on cost of my HRL position is 2.42%, so I'm boosting dividend income by a factor of 2.42. If the option is exercised, I'll sell 100 shares of HRL at a reduced cost basis of $33.64 per share, for capital gains of 48.65%.



#263 : 2018-12-06: Sold to Open 2 Contracts of Option INTC Feb 15 2019 55.00 C

I own 200 shares of Intel (INTC) at a cost basis of $27.75 per share. I'm willing to sell these shares for $55.00 on or before 15 February:

Open Date :  2018-12-06
Expiration Date :  2019-02-15    Number of Days in Trade : 71
Cost Basis :  $27.75 per shareGain at Strike Price : 98.20%
Strike Price :  $55.00 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $0.53 per shareOptions Income : $106.00
Commission : -$2.53
Net Premium :  $0.517 per shareNet Options Income : $103.47
Options Yield :  1.86%Annualized Options Yield : 9.59%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $27.21Gain if Exercised : 102.15%

This covered call yields 1.86%, or 9.59% on an annualized basis. The yield on cost of my INTC position is 4.32%, so I'm boosting dividend income by a factor of 2.22. If the options are exercised, I'll sell 200 shares of INTC at a reduced cost basis of $27.21 per share, for capital gains of 102.15%.


The ES, HRL, and INTC covered calls achieved my goal of doubling dividend yield, but the DGX covered call did not.

JPM, KBH, KO, KRG

#2642018-12-06:-1×JPM 18 Jan 2019 $110.00 C $ 146.00 ( $ -1.09 )
#2652018-12-06:-3×KBH 19 Jul 2019 $26.00 C $ 309.00 ( $ -1.46 )
#2662018-12-06:-2×KO 17 May 2019 $52.50 C $ 154.00 ( $ -1.57 )
#2672018-12-06:-4×KRG 17 May 2019 $20.00 C $   60.00 ( $   0.00 )

#264 : 2018-12-06: Sold to Open 1 Contract of Option JPM Jan 18 2019 110.00 C

I own 100 shares of JP Morgan Chase (JPM) at a cost basis of $100.54 per share. I'm willing to sell these shares for $110.00 on or before 18 January:

Open Date :  2018-12-06
Expiration Date :  2019-01-18    Number of Days in Trade : 43
Cost Basis :  $100.54 per shareGain at Strike Price : 9.41%
Strike Price :  $110.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.46 per shareOptions Income : $146.00
Commission : -$1.09
Net Premium :  $1.449 per shareNet Options Income : $144.91
Options Yield :  1.44%Annualized Options Yield : 12.24%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $99.07Gain if Exercised : 11.03%

This covered call yields 1.44%, or 12.24% on an annualized basis. The yield on cost of my JPM position is 3.18%, so I'm boosting dividend income by a factor of 3.85. If the option is exercised, I'll sell 100 shares of JPM at a reduced cost basis of $99.07 per share, for capital gains of 11.03%.



#265 : 2018-12-06: Sold to Open 3 Contracts of Option KBH Jul 19 2019 26.00 C

I own 300 shares of KB Home (KBH) at a cost basis of $30.00 per share. I'm willing to sell these shares for $26.00 on or before 19 July:

Open Date :  2018-12-06
Expiration Date :  2019-07-19    Number of Days in Trade : 225
Cost Basis :  $30.00 per shareGain at Strike Price : -13.33%
Strike Price :  $26.00 per share
Number of Contracts : 3Number of Shares :300
Call Premium :  $1.03 per shareOptions Income : $309.00
Commission : -$1.46
Net Premium :  $1.025 per shareNet Options Income : $307.54
Options Yield :  3.42%Annualized Options Yield : 5.55%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $28.97Gain if Exercised : -10.24%

This covered call yields 3.42%, or 5.55% on an annualized basis. The yield on cost of my KBH position is 0.33%, so I'm boosting dividend income by a factor of 16.64. If the options are exercised, I'll sell 300 shares of KBH at a reduced cost basis of $28.97 per share, for capital loss of 10.24%.



#266 : 2018-12-06: Sold to Open 2 Contracts of Option KO May 17 2019 52.50 C

I own 200 shares of Coca-Cola (KO) at a cost basis of $41.28 per share. I'm willing to sell these shares for $52.50 on or before 17 May:

Open Date :  2018-12-06
Expiration Date :  2019-05-17    Number of Days in Trade : 162
Cost Basis :  $41.28 per shareGain at Strike Price : 27.18%
Strike Price :  $52.50 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $0.77 per shareOptions Income : $154.00
Commission : -$1.57
Net Premium :  $0.762 per shareNet Options Income : $152.43
Options Yield :  1.85%Annualized Options Yield : 4.16%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $40.50Gain if Exercised : 29.62%

This covered call yields 1.85%, or 4.16% on an annualized basis. The yield on cost of my KO position is 3.78%, so I'm boosting dividend income by a factor of 1.10. If the options are exercised, I'll sell 200 shares of KO at a reduced cost basis of $40.50 per share, for capital gains of 29.62%.



#267 : 2018-12-06: Sold to Open 4 Contracts of Option KRG May 17 2019 20.00 C

I own 400 shares of Kite Realty (KRG) at a cost basis of $15.93 per share. I'm willing to sell these shares for $20.00 on or before 17 May:

Open Date :  2018-12-06
Expiration Date :  2019-05-17    Number of Days in Trade : 162
Cost Basis :  $15.93 per shareGain at Strike Price : 25.55%
Strike Price :  $20.00 per share
Number of Contracts : 4Number of Shares :400
Call Premium :  $0.15 per shareOptions Income : $60.00
Commission : $0.00
Net Premium :  $0.150 per shareNet Options Income : $60.00
Options Yield :  0.94%Annualized Options Yield : 2.12%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $15.78Gain if Exercised : 26.74%

This covered call yields 0.94%, or 2.12% on an annualized basis. The yield on cost of my KRG position is 7.97%, so I'm boosting dividend income by a factor of 0.27. If the options are exercised, I'll sell 400 shares of KRG at a reduced cost basis of $15.78 per share, for capital gains of 26.74%.


The JPM and KBH covered calls achieved my goal of doubling dividend yield, but the KO and KRG covered calls did not.

LOW, MAIN, MSFT, O
#2682018-12-06:-1×LOW 21 Jun 2019 $120.00 C $   67.00 ( $ -0.79 )
#2692018-12-06:-5×MAIN 21 Jun 2019 $40.00 C $ 250.00 ( $ -0.18 )
#2702018-12-06:-1×MSFT 15 Mar 2019 $125.00 C $ 115.00 ( $ -0.79 )
#2712018-12-06:-2×O 21 Jun 2019 $70.00 C $ 188.00 ( $   0.00 )

#268 : 2018-12-06: Sold to Open 1 Contract of Option LOW Jun 21 2019 120.00 C

I own 100 shares of Lowe's (LOW) at a cost basis of $92.50 per share. I'm willing to sell these shares for $120.00 on or before 21 June:

Open Date :  2018-12-06
Expiration Date :  2019-06-21    Number of Days in Trade : 197
Cost Basis :  $92.50 per shareGain at Strike Price : 29.73%
Strike Price :  $120.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.67 per shareOptions Income : $67.00
Commission : -$0.79
Net Premium :  $0.662 per shareNet Options Income : $66.21
Options Yield :  0.72%Annualized Options Yield : 1.33%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $91.82Gain if Exercised : 30.69%

This covered call yields 0.72%, or 1.33% on an annualized basis. The yield on cost of my LOW position is 2.08%, so I'm boosting dividend income by a factor of 0.64. If the option is exercised, I'll sell 100 shares of LOW at a reduced cost basis of $91.82 per share, for capital gains of 30.69%.



#269 : 2018-12-06: Sold to Open 500 Contracts of Option MAIN Jun 21 2019 40.00 C

I own 500 shares of Main Street Capital (MAIN) at a cost basis of $31.56 per share. I'm willing to sell these shares for $40.00 on or before 21 June:

Open Date :  2018-12-06
Expiration Date :  2019-06-21    Number of Days in Trade : 197
Cost Basis :  $31.56 per shareGain at Strike Price : 26.74%
Strike Price :  $40.00 per share
Number of Contracts : 5Number of Shares :500
Call Premium :  $0.52 per shareOptions Income : $259.00
Commission : -$0.18
Net Premium :  $0.518 per shareNet Options Income : $258.82
Options Yield :  1.64%Annualized Options Yield : 3.04%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $31.04Gain if Exercised : 28.86%

This covered call yields 1.64%, or 3.04% on an annualized basis. The yield on cost of my MAIN position is 7.41%, so I'm boosting dividend income by a factor of 0.41. If the options are exercised, I'll sell 500 shares of MAIN at a reduced cost basis of $31.04 per share, for capital gains of 28.86%.



#270 : 2018-12-06: Sold to Open 100 Contracts of Option MSFT Mar 15 2019 125.00 C

I own 100 shares of Microsoft (MSFT) at a cost basis of $46.63 per share. I'm willing to sell these shares for $125.00 on or before 15 March:

Open Date :  2018-12-06
Expiration Date :  2019-03-15    Number of Days in Trade : 99
Cost Basis :  $46.63 per shareGain at Strike Price : 168.07%
Strike Price :  $125.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.15 per shareOptions Income : $115.00
Commission : -$0.79
Net Premium :  $1.142 per shareNet Options Income : $114.21
Options Yield :  2.45%Annualized Options Yield : 9.04%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $45.47Gain if Exercised : 174.89%

This covered call yields 2.45%, or 9.04% on an annualized basis. The yield on cost of my MSFT position is 3.95%, so I'm boosting dividend income by a factor of 2.29. If the options are exercised, I'll sell 100 shares of MSFT at a reduced cost basis of $45.47 per share, for capital gains of 174.89%.



#271 : 2018-12-06: Sold to Open 200 Contracts of Option O Jun 21 2019 70.00 C

I own 200 shares of Realty Income (O) at a cost basis of $54.66 per share. I'm willing to sell these shares for $70.00 on or before 21 June:

Open Date :  2018-12-06
Expiration Date :  2019-06-21    Number of Days in Trade : 197
Cost Basis :  $54.66 per shareGain at Strike Price : 28.06%
Strike Price :  $70.00 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $0.94 per shareOptions Income : $188.00
Commission : $0.00
Net Premium :  $0.940 per shareNet Options Income : $188.00
Options Yield :  1.72%Annualized Options Yield : 3.19%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $53.72Gain if Exercised : 30.31%

This covered call yields 1.72%, or 3.19% on an annualized basis. The yield on cost of my O position is 4.85%, so I'm boosting dividend income by a factor of 0.66. If the options are exercised, I'll sell 200 shares of O at a reduced cost basis of $53.72 per share, for capital gains of 30.31%.


Only the MSFT covered call achieved my goal of doubling dividend yield.

PFE, ROST, SBUX, T
#2722018-12-06:-2×PFE 21 Jun 2019 $50.00 C $ 154.00 ( $ -0.97 )
#2752018-12-06:-1×ROST 17 May 2019 $100.00 C $   85.00 ( $  -1.94 )
#2762018-12-06:-1×SBUX 15 Feb 2019 $70.00 C    $ 132.00 ( $  -0.79 )
#2772018-12-06:-4×T 21 Jun 2019 $35.00 C $ 128.00 ( $  -1.95 )

#272 : 2018-12-06: Sold to Open 2 Contracts of Option PFE Jun 21 2019 50.00 C

I own 200 shares of Pfizer (PFE) at a cost basis of $36.49 per share. I'm willing to sell these shares for $50.00 on or before 21 June:

Open Date :  2018-12-06
Expiration Date :  2019-06-21    Number of Days in Trade : 197
Cost Basis :  $36.49 per shareGain at Strike Price : 37.02%
Strike Price :  $50.00 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $0.77 per shareOptions Income : $154.00
Commission : -$0.97
Net Premium :  $0.765 per shareNet Options Income : $153.03
Options Yield :  2.10%Annualized Options Yield : 3.89%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $35.72Gain if Exercised : 40.00%

This covered call yields 2.10%, or 3.89% on an annualized basis. The yield on cost of my PFE position is 3.95%, so I'm boosting dividend income by a factor of 0.99. If the options are exercised, I'll sell 200 shares of PFE at a reduced cost basis of $35.72 per share, for capital gains of 40.00%.



#275 : 2018-12-06: Sold to Open 1 Contract of Option ROST May 17 2019 100.00 C

I own 100 shares of Ross Stores (ROST) at a cost basis of $86.18 per share. I'm willing to sell these shares for $100.00 on or before 17 May:

Open Date :  2018-12-06
Expiration Date :  2019-05-17    Number of Days in Trade : 162
Cost Basis :  $86.18 per shareGain at Strike Price : 16.04%
Strike Price :  $100.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.85 per shareOptions Income : $85.00
Commission : -$1.94
Net Premium :  $0.831 per shareNet Options Income : $83.06
Options Yield :  0.96%Annualized Options Yield : 2.17%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $85.31Gain if Exercised : 17.22%

This covered call yields 0.96%, or 2.17% on an annualized basis. The yield on cost of my ROST position is 1.04%, so I'm boosting dividend income by a factor of 2.08. If the option is exercised, I'll sell 100 shares of ROST at a reduced cost basis of $85.31 per share, for capital gains of 17.22%.



#276 : 2018-12-06: Sold to Open 1 Contract of Option SBUX Feb 15 2019 70.00 C

I own 100 shares of Starbucks (SBUX) at a cost basis of $55.93 per share. I'm willing to sell these shares for $70.00 on or before 15 February:

Open Date :  2018-12-06
Expiration Date :  2019-02-15    Number of Days in Trade : 71
Cost Basis :  $55.93 per shareGain at Strike Price : 25.16%
Strike Price :  $70.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.32 per shareOptions Income : $132.00
Commission : -$0.79
Net Premium :  $1.312 per shareNet Options Income : $131.21
Options Yield :  2.35%Annualized Options Yield : 12.07%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $54.60Gain if Exercised : 28.20%

This covered call yields 2.35%, or 12.07% on an annualized basis. The yield on cost of my SBUX position is 2.57%, so I'm boosting dividend income by a factor of 4.69. If the option is exercised, I'll sell 100 shares of SBUX at a reduced cost basis of $54.60 per share, for capital gains of 28.20%.



#277 : 2018-12-06: Sold to Open 4 Contracts of Option T Jun 21 2019 35.00 C

I own 400 shares of AT&T (T) at a cost basis of $32.53 per share. I'm willing to sell these shares for $35.00 on or before 21 June:

Open Date :  2018-12-06
Expiration Date :  2019-06-21    Number of Days in Trade : 197
Cost Basis :  $32.53 per shareGain at Strike Price : 7.59%
Strike Price :  $35.00 per share
Number of Contracts : 4Number of Shares :400
Call Premium :  $0.32 per shareOptions Income : $128.00
Commission : -$1.95
Net Premium :  $0.315 per shareNet Options Income : $126.05
Options Yield :  0.97%Annualized Options Yield : 1.80%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $32.21Gain if Exercised : 8.68%

This covered call yields 0.97%, or 1.80% on an annualized basis. The yield on cost of my T position is 6.27%, so I'm boosting dividend income by a factor of 0.29. If the options are exercised, I'll sell 400 shares of T at a reduced cost basis of $32.21 per share, for capital gains of 8.68%.


The ROST and SBUX covered calls achieved my goal of doubling dividend yield, but the PFE and T covered calls did not.

TROW, TRV, TSM, VLO
#2792018-12-06:-1×TROW 18 Apr 2019 $110.00 C $ 115.00 ( $ -0.34 )
#2802018-12-06:-1×TRV 18 Apr 2019 $140.00 C $ 100.00 ( $ -0.34 )
#2812018-12-06:-1×TSM 19 Jul 2019 $45.00 C $   64.00 ( $ -1.09 )
#2832018-12-06:-1×VLO 14 Mar 2019 $90.00 C      $ 165.00 ( $ -0.79 )

#279 : 2018-12-06: Sold to Open 1 Contract of Option TROW Apr 18 2019 110.00 C

I own 100 shares of T. Rowe Price (TROW) at a cost basis of $74.29 per share. I'm willing to sell these shares for $110.00 on or before 18 April:

Open Date :  2018-12-06
Expiration Date :  2019-04-18    Number of Days in Trade : 133
Cost Basis :  $74.29 per shareGain at Strike Price : 48.07%
Strike Price :  $110.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.15 per shareOptions Income : $115.00
Commission : -$0.34
Net Premium :  $1.147 per shareNet Options Income : $114.66
Options Yield :  1.54%Annualized Options Yield : 4.24%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $73.14Gain if Exercised : 50.40%

This covered call yields 1.54%, or 4.24% on an annualized basis. The yield on cost of my TROW position is 3.77%, so I'm boosting dividend income by a factor of 1.12. If the option is exercised, I'll sell 100 shares of TROW at a reduced cost basis of $73.14 per share, for capital gains of 50.40%.



#280 : 2018-12-06: Sold to Open 1 Contract of Option TRV Apr 18 2019 140.00 C

I own 100 shares of Travellers (TRV) at a cost basis of $115.88 per share. I'm willing to sell these shares for $140.00 on or before 18 April:

Open Date :  2018-12-06
Expiration Date :  2019-04-18    Number of Days in Trade : 133
Cost Basis :  $115.88 per shareGain at Strike Price : 20.81%
Strike Price :  $140.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.00 per shareOptions Income : $100.00
Commission : -$0.34
Net Premium :  $0.997 per shareNet Options Income : $99.66
Options Yield :  0.86%Annualized Options Yield : 2.36%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $114.88Gain if Exercised : 21.87%

This covered call yields 0.86%, or 2.36% on an annualized basis. The yield on cost of my TRV position is 2.66%, so I'm boosting dividend income by a factor of 0.89. If the option is exercised, I'll sell 100 shares of TRV at a reduced cost basis of $114.88 per share, for capital gains of 21.87%.



#281 : 2018-12-06: Sold to Open 1 Contract of Option TSM Jul 19 2019 45.00 C

I own 100 shares of Taiwan Semiconductor (TSM) at a cost basis of $41.34 per share. I'm willing to sell these shares for $45.00 on or before 19 July:

Open Date :  2018-12-06
Expiration Date :  2019-07-19    Number of Days in Trade : 225
Cost Basis :  $41.34 per shareGain at Strike Price : 8.85%
Strike Price :  $45.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.64 per shareOptions Income : $64.00
Commission : -$1.09
Net Premium :  $0.629 per shareNet Options Income : $62.91
Options Yield :  1.52%Annualized Options Yield : 2.47%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $40.69Gain if Exercised : 10.59%

This covered call yields 1.52%, or 2.47% on an annualized basis. The yield on cost of my TSM position is 2.52%, so I'm boosting dividend income by a factor of 0.98. If the option is exercised, I'll sell 100 shares of TSM at a reduced cost basis of $40.69 per share, for capital gains of 10.59%.



#283 : 2018-12-06: Sold to Open 1 Contract of Option VLO Mar 14 2019 90.00 C

I own 100 shares of Valero Energy (VLO) at a cost basis of $63.54 per share. I'm willing to sell these shares for $90.00 on or before 14 March:

Open Date :  2018-12-06
Expiration Date :  2019-03-14    Number of Days in Trade : 98
Cost Basis :  $63.54 per shareGain at Strike Price : 41.64%
Strike Price :  $90.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.65 per shareOptions Income : $165.00
Commission : -$0.79
Net Premium :  $1.642 per shareNet Options Income : $164.21
Options Yield :  2.58%Annualized Options Yield : 9.63%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $61.88Gain if Exercised : 45.44%

This covered call yields 2.58%, or 9.63% on an annualized basis. The yield on cost of my VLO position is 5.04%, so I'm boosting dividend income by a factor of 1.91. If the option is exercised, I'll sell 100 shares of VLO at a reduced cost basis of $61.88 per share, for capital gains of 45.44%.


Unfortunately, none of the TROW, TRV, TSM, and VLO covered calls achieved my goal of doubling dividend yield.

VYM, WSM, XOM, MO
#2842018-12-06:-1×VYM 18 Jan 2019 $85.00 C $   80.00 ( $ -0.34 )
#2862018-12-06:-2×WSM 15 Feb 2019 $60.00 C $ 300.00 ( $ -0.00 )
#2872018-12-06:-1×XOM 18 Apr 2019 $85.00 C $ 126.00 ( $ -1.09 )
#2902018-12-14:-2×MO 21 Jun 2019 $60.00 C $ 230.00 ( $ -1.58 )

#284 : 2018-12-06: Sold to Open 1 Contract of Option VYM Jan 18 2019 85.00 C

I own 100 shares of Vanguard High Dividend Yield ETF (VYM) at a cost basis of $78.97 per share. I'm willing to sell these shares for $85.00 on or before 18 January:

Open Date :  2018-12-06
Expiration Date :  2019-01-18    Number of Days in Trade : 43
Cost Basis :  $78.97 per shareGain at Strike Price : 7.64%
Strike Price :  $85.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.80 per shareOptions Income : $80.00
Commission : -$0.34
Net Premium :  $0.797 per shareNet Options Income : $79.66
Options Yield :  1.01%Annualized Options Yield : 8.57%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $78.17Gain if Exercised : 8.74%

This covered call yields 1.01%, or 8.57% on an annualized basis. The yield on cost of my VYM position is 3.23%, so I'm boosting dividend income by a factor of 2.65. If the option is exercised, I'll sell 100 shares of VYM at a reduced cost basis of $78.17 per share, for capital gains of 8.74%.



#286 : 2018-12-06: Sold to Open 2 Contracts of Option WSM Feb 15 2019 60.00 C

I own 200 shares of Williams-Sonoma (WSM) at a cost basis of $60.00 per share. I'm willing to sell these shares for $60.00 on or before 15 February:

Open Date :  2018-12-06
Expiration Date :  2019-02-15    Number of Days in Trade : 71
Cost Basis :  $60.00 per shareGain at Strike Price : 0.00%
Strike Price :  $60.00 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $1.50 per shareOptions Income : $300.00
Commission : $0.00
Net Premium :  $1.500 per shareNet Options Income : $300.00
Options Yield :  2.50%Annualized Options Yield : 12.86%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $58.50Gain if Exercised : 2.56%

This covered call yields 2.50%, or 12.86% on an annualized basis. The yield on cost of my WSM position is 2.87%, so I'm boosting dividend income by a factor of 4.49. If the options are exercised, I'll sell 200 shares of WSM at a reduced cost basis of $58.50 per share, for capital gains of 2.56%.



#287 : 2018-12-06: Sold to Open 1 Contract of Option XOM Apr 18 2019 85.00 C

I own 100 shares of Exxon Mobil (XOM) at a cost basis of $78.22 per share. I'm willing to sell these shares for $85.00 on or before 18 April:

Open Date :  2018-12-06
Expiration Date :  2019-04-18    Number of Days in Trade : 133
Cost Basis :  $78.22 per shareGain at Strike Price : 8.67%
Strike Price :  $85.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.26 per shareOptions Income : $126.00
Commission : -$1.09
Net Premium :  $1.249 per shareNet Options Income : $124.91
Options Yield :  1.60%Annualized Options Yield : 4.39%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $76.95Gain if Exercised : 10.46%

This covered call yields 1.60%, or 4.39% on an annualized basis. The yield on cost of my XOM position is 4.19%, so I'm boosting dividend income by a factor of 1.05. If the option is exercised, I'll sell 100 shares of XOM at a reduced cost basis of $76.95 per share, for capital gains of 10.46%.



#290 : 2018-12-14: Sold to Open 2 Contracts of Option MO Jun 21 2019 60.00 C

I own 200 shares of Altria (MO) at a cost basis of $49.82 per share. I'm willing to sell these shares for $60.00 on or before 21 June:

Open Date :  2018-12-14
Expiration Date :  2019-06-21    Number of Days in Trade : 189
Cost Basis :  $49.82 per shareGain at Strike Price : 20.43%
Strike Price :  $60.00 per share
Number of Contracts : 2Number of Shares :200
Call Premium :  $1.15 per shareOptions Income : $230.00
Commission : -$1.58
Net Premium :  $1.142 per shareNet Options Income : $228.42
Options Yield :  2.29%Annualized Options Yield : 4.43%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $48.66Gain if Exercised : 23.30%

This covered call yields 2.29%, or 4.43% on an annualized basis. The yield on cost of my MO position is 6.42%, so I'm boosting dividend income by a factor of 0.69. If the options are exercised, I'll sell 200 shares of MO at a reduced cost basis of $48.66 per share, for capital gains of 23.30%.


The VYM and WSM covered calls achieved my goal of doubling dividend yield, but the XOM and MO covered calls did not.

IP, WSM, DGX, JPM
#2922018-12-27:-1×IP 15 Feb 2019 $42.50 C $  105.00 ( $ -1.09 )
#2942018-12-27:-1×WSM 15 Feb 2019 $55.00 C $   75.00 ( $  -0.34 )
#2952018-12-28:-1×DGX 17 May 2019 $100.00 C $   62.00 ( $  -1.09 )
#2962018-12-28:-1×JPM 15 Feb 2019 $105.00 C $ 154.00 ( $  -1.09 )


#292 : 2018-12-27: Sold to Open 1 Contract of Option IP Feb 15 2019 42.50 C

I own 100 shares of International Paper (IP) at a cost basis of $42.50 per share. I'm willing to sell these shares for $42.50 on or before 15 February:

Open Date :  2018-12-27
Expiration Date :  2019-02-15    Number of Days in Trade : 50
Cost Basis :  $42.50 per shareGain at Strike Price : 0.00%
Strike Price :  $42.50 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.05 per shareOptions Income : $105.00
Commission : -$1.09
Net Premium :  $1.039 per shareNet Options Income : $103.91
Options Yield :  2.44%Annualized Options Yield : 17.86%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $41.44Gain if Exercised : 2.56%

This covered call yields 2.44%, or 17.86% on an annualized basis. The yield on cost of my IP position is 4.71%, so I'm boosting dividend income by a factor of 3.80. If the option is exercised, I'll sell 100 shares of IP at a reduced cost basis of $41.44 per share, for capital gains of 2.56%.



#294 : 2018-12-27: Sold to Open 1 Contract of Option WSM Feb 15 2019 55.00 C

I own 100 shares of Williams-Sonoma (WSM) at a cost basis of $60.00 per share. I'm willing to sell these shares for $55.00 on or before 15 February:

Open Date :  2018-12-27
Expiration Date :  15Feb    Number of Days in Trade : 50
Cost Basis :  $60.00 per shareGain at Strike Price : -8.33%
Strike Price :  $55.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.75 per shareOptions Income : $75.00
Commission : -$0.34
Net Premium :  $0.747 per shareNet Options Income : $74.66
Options Yield :  1.24%Annualized Options Yield : 9.09%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $59.25Gain if Exercised : -7.17%

This covered call yields 1.24%, or 9.09% on an annualized basis. The yield on cost of my WSM position is 2.87%, so I'm boosting dividend income by a factor of 3.17. If the option is exercised, I'll sell 100 shares of WSM at a reduced cost basis of $59.25 per share, for capital gains of -7.17%.



#295 : 2018-12-28: Sold to Open 1 Contract of Option DGX May 17 2019 100.00 C

I own 100 shares of Williams-Sonoma (DGX) at a cost basis of $88.76 per share. I'm willing to sell these shares for $100.00 on or before 17 May:

Open Date :  2018-12-28
Expiration Date :  17May    Number of Days in Trade : 140
Cost Basis :  $88.76 per shareGain at Strike Price : 12.66%
Strike Price :  $100.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.62 per shareOptions Income : $62.00
Commission : -$1.09
Net Premium :  $0.609 per shareNet Options Income : $60.91
Options Yield :  0.69%Annualized Options Yield : 1.79%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $88.13Gain if Exercised : 13.47%

This covered call yields 0.69%, or 1.79% on an annualized basis. The yield on cost of my DGX position is 2.39%, so I'm boosting dividend income by a factor of 0.75. If the option is exercised, I'll sell 100 shares of DGX at a reduced cost basis of $88.13 per share, for capital gains of 13.47%.



#296 : 2018-12-28: Sold to Open 1 Contract of Option JPM Feb 15 2019 105.00 C

I own 100 shares of JP Morgan Chase (JPM) at a cost basis of $100.54 per share. I'm willing to sell these shares for $105.00 on or before 15 February:

Open Date :  2018-12-28
Expiration Date :  2019-02-15    Number of Days in Trade : 49
Cost Basis :  $100.54 per shareGain at Strike Price : 4.44%
Strike Price :  $105.00 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $1.54 per shareOptions Income : $154.00
Commission : -$1.09
Net Premium :  $1.529 per shareNet Options Income : $152.91
Options Yield :  1.52%Annualized Options Yield : 11.34%
----------------------------  ----------------------------------------------------  -----------
Commission if Exercised : $0.00
Cost Basis if Exercised : $98.99Gain if Exercised : 6.07%

This covered call yields 1.52%, or 11.34% on an annualized basis. The yield on cost of my JPM position is 3.18%, so I'm boosting dividend income by a factor of 3.56. If the option is exercised, I'll sell 100 shares of JPM at a reduced cost basis of $98.99 per share, for capital gains of 6.07%.


The IP, WSM, and JPM covered calls achieved my goal of doubling dividend yield, but the DGX covered call did not.

Concluding Remarks


In Part 1 of my December 2018 Options Update article, I presented all the covered call trades I executed in December. In all, there were 32 covered call trades, which added options income of just more than $5,000 to my options income tally.

While several of the trades failed to achieve my goal of doubling dividend yield, overall, the average boost factor of these trades is 2.36%. So on an annualized basis, these covered call trades more than doubles the yield of the corresponding positions.

Part 2 of this article will cover new put contracts and look at options that expire soon. And in Part 3, I'll present an options assignment, some closing trades, and a few rolled options trades. I'll also review my 2018 options goal.

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