Last Friday was July's main options expiration day. I had several options slated for expiration and this short article explains what happened.I usually write monthly options update articles to summarize my options trades and also to keep track of options income. Each update serves as a status report on open options and potential obligations.
When options expire, I no longer have any associated obligations. The options premium collected become free and clear, also known as secured. Since I started options trading to boost DivGro's dividend income, I've secured options income totaling $28,018.
Recap
Here is a summary of the options that expired on 19 July, as presented in last month's Options Update article. At the time of publication, Walt Disney (DIS) traded above the $140 strike price of the covered call option I'd sold. Furthermore, I noted that the covered call on Dominion Energy (D) only had a 2% safety margin. The other options had larger margins of safety.
July 2019:
On 19 July, General Mills (GIS) closed at $52.77 per share or about 6% above the strike price of the puts I'd sold. So the puts expired and I secured $175 in options income in the process.
While this turned out to be a successful trade, I no longer wish to sell puts on GIS. When selling puts, you have to be willing to buy shares at the strike price. But GIS made some fundamental changes to its business and froze its dividend following a major acquisition in 2018. Without the prospect of dividend increases in the foreseeable future, I'm not interested in owning GIS shares anymore.
DIS dropped 1.26% on Friday and closed at $139.85 per share, just 15¢ below the strike price of the covered call I'd sold. So the covered call expired and I secured $241 in options income.
I'm happy to retain my shares even though I was fully prepared to "let them go". DIS is my largest holding and if the 100 shares got called away, I still would have owned 100 shares:
Now I'll have an opportunity to sell another DIS covered call and collect additional options income. I'll probably look at the $145 strike price and the September or October expiration dates.
On 19 July, Taiwan Semiconductor Manufacturing (TSM) closed at $43.83 per share, 2.6% below the $45 strike price of the covered call I'd sold. So the option expired and I secured $63 in options income.
TSM is not a dividend growth stock, but rather a dividend-paying stock. I'm planning on selling another $45 strike covered calls, probably targeting the October expiration date. That strike price is near TSM's 52-week high of $45.64 and I'll be happy to sell my shares at that price.
On 19 July, D closed at $76.85 per share, about 3.9% below the $80 strike price of the covered call I'd sold. So the option expired and I secured $130 in options income.
With D trading at a premium to fair value, I'm happy to sell another $80 covered call and to collect more options income. The October expiration date looks good although I might go out further to the January 2020 expiration.
D has not traded at or above $80 in the past year, so that strike price seems appropriate.
Below I'm listing options expiring in August. On expiration day, in the money options will result in options assignment:
August 2019:
The DGX options are in the money and the TIF option is out of the money with a small margin of safety, so I'll have to monitor these carefully as the options expiration dates approach.
The exciting thing about collecting options income is that I can deploy that income immediately and buy more dividend growth stocks, so boosting DivGro's ability to generate dividend income.
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July 2019:
| #350 | 2019-05-22 | : | -2 | × | GIS 19 Jul 2019 $50.00 P | $ 176.00 | ( $ -1.00 ) |
→ In the money with a 9% safety margin
| ||
| #340 | 2019-05-15 | : | -1 | × | DIS 19 Jul 2019 $140.00 C | $ 242.00 | ( $ -0.80 ) |
→ In the money by 2% — caution!
| ||
| #281 | 2018-12-06 | : | -1 | × | TSM 19 Jul 2019 $45.00 C | $ 64.00 | ( $ -1.09 ) |
→ Out of the money with a 10% safety margin
| ||
| #259 | 2018-12-06 | : | -1 | × | D 19 Jul 2019 $80.00 C | $ 130.00 | ( $ -0.34 ) |
→ Out of the money with a 2% safety margin
|
GIS
On 19 July, General Mills (GIS) closed at $52.77 per share or about 6% above the strike price of the puts I'd sold. So the puts expired and I secured $175 in options income in the process.
While this turned out to be a successful trade, I no longer wish to sell puts on GIS. When selling puts, you have to be willing to buy shares at the strike price. But GIS made some fundamental changes to its business and froze its dividend following a major acquisition in 2018. Without the prospect of dividend increases in the foreseeable future, I'm not interested in owning GIS shares anymore.
DIS
DIS dropped 1.26% on Friday and closed at $139.85 per share, just 15¢ below the strike price of the covered call I'd sold. So the covered call expired and I secured $241 in options income.
I'm happy to retain my shares even though I was fully prepared to "let them go". DIS is my largest holding and if the 100 shares got called away, I still would have owned 100 shares:
Now I'll have an opportunity to sell another DIS covered call and collect additional options income. I'll probably look at the $145 strike price and the September or October expiration dates.
TSM
On 19 July, Taiwan Semiconductor Manufacturing (TSM) closed at $43.83 per share, 2.6% below the $45 strike price of the covered call I'd sold. So the option expired and I secured $63 in options income.
TSM is not a dividend growth stock, but rather a dividend-paying stock. I'm planning on selling another $45 strike covered calls, probably targeting the October expiration date. That strike price is near TSM's 52-week high of $45.64 and I'll be happy to sell my shares at that price.
D
On 19 July, D closed at $76.85 per share, about 3.9% below the $80 strike price of the covered call I'd sold. So the option expired and I secured $130 in options income.
With D trading at a premium to fair value, I'm happy to sell another $80 covered call and to collect more options income. The October expiration date looks good although I might go out further to the January 2020 expiration.
D has not traded at or above $80 in the past year, so that strike price seems appropriate.
Options Expiring Soon
Below I'm listing options expiring in August. On expiration day, in the money options will result in options assignment:
August 2019:
| #355 | 2019-05-29 | : | -2 | × | MS 16 Aug 2019 $40.00 P | $ 262.00 | ( $ -1.00 ) |
→ Out of the money with an 11% safety margin
| ||
| #344 | 2019-05-15 | : | -1 | × | TIF 16 Aug 2019 $90.00 P | $ 302.00 | ( $ -0.65 ) |
→ Out of the money with a 3% safety margin
| ||
| #331 | 2019-03-27 | : | -2 | × | DGX 16 Aug 2019 $95.00 C | $ 341.00 | ( $ -1.67 ) |
→ In the money by 5% — caution!
| ||
| #329 | 2019-03-27 | : | -1 | × | AAPL 16 Aug 2019 $170.00 P | $ 492.00 | ( $ -0.55 ) |
→ Out of the money with a 19% safety margin
| ||
| #325 | 2019-03-25 | : | -2 | × | GILD 16 Aug 2019 $70.00 C | $ 314.00 | ( $ -0.99 ) |
→ Out of the money with a 9% safety margin
| ||
Concluding Remarks
I secured options income totaling $609 with last Friday's expired options. With no further obligations, I can rinse and repeat by selling covered calls again! I'm hoping to do so soon.
The exciting thing about collecting options income is that I can deploy that income immediately and buy more dividend growth stocks, so boosting DivGro's ability to generate dividend income.
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