Thursday, January 7, 2021

Options Update: December 2020 (Part 2)

This is Part 2 of my final Options Update article of 2020. In these updates, I keep track of options trades and provide a running tally of DivGro's options income to date.

After failing to achieve my 2020 goal of collecting at least $24,000 in options income, in December, I executed several trades to improve my options portfolio for the coming year. I'm setting the same options income goal for 2021.

Part 1 covered 23 trades in which I rolled forward options. In Part 2, I'm presenting some closing trades as well as new covered calls and put contracts. Finally, Part 3 will present assignments, expired options,  and a list of upcoming expiring options. 

Recap


In December, I closed five options early and had two assignments and fifteen expirations. Additionally, I rolled forward 23 options and had 29 income-generating trades:


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.

#5552020-11-30:-2×GILD 19 Feb 2021 $70.00 C $       114.00 ( $        -56.74 )
#5252020-09-21:-2×PSX 15 Jan 2021 $75.00 C $       164.00 ( $      -167.10 )
#5032020-08-21:-8×AAPL 15 Jan 2021 $75.00 P $       731.00 ( $        -91.72 )
#4952020-07-23:-2×WFC 15 Jan 2021 $32.50 C $       220.00 ( $        -59.97 )
#4932020-07-23:-1×SPG 15 Jan 2021 $100.00 C $       232.00 ( $        -31.88 ) 

I closed five options in December, mostly related to some tax-loss harvesting trades I executed on 30 December. The exception is the closing trade of AAPL puts:

On 11 December, Apple Inc (AAPL) traded around $122 per share, about 63% above the $75 puts I'd sold earlier. With the options so deep in the money, I decided to roll forward four of these options (see Part 1) and to close the remaining eight options. The trade secured about $639 in options income. 

I closed my position Gilead Sciences, Inc (GILD) to harvest tax losses and, consequently, also closed the related covered calls. The trade secured about $57 in options income. 

Similarly, I closed my position in Phillips 66 (PSX) to harvest tax losses and needed to buy back the related covered calls. The trade cost me about $3 in secured options income. 

Finally, I closed my positions in Wells Fargo & Company (WFC) and Simon Property Group, Inc (SPG) and bought back the related covered calls. The trades secured options income of about $160 and about $200, respectively.

In all, the five closing trades secured $1,053 in options income. 

Covered Calls


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

I sold the following covered calls in December:

#6132020-12-30:-1×HRL 18 Jun 2021 $52.50 C $         83.00 ( $          -1.09 )
#6032020-12-18:-3×PFE 19 Mar 2021 $50.00 C $       108.00 ( $          -2.21 )
#5932020-12-18:-3×KO 19 Mar 2021 $60.00 C $         99.00 ( $          -1.31 ) 

#613 : 2020-12-30: Sold to Open 1 Contract of Option HRL Jun 18 2021 52.50 C

I own 100 shares of Hormel Foods Corporation (HRL) at a cost basis of $40.66 per share. I'm willing to sell these shares for $52.50 on or before 18 June:

Open Date :  2020-12-30  
Expiration Date :  2021-06-18    Number of Days in Trade : 170
Cost Basis :  $40.66 per shareGain at Strike Price : 29.12%
Strike Price :  $52.50 per share
Number of Contracts : 1Number of Shares :100
Call Premium :  $0.83 per shareOptions Income : $83.00
  Commission : -$1.09
Net Premium :  $0.819 per shareNet Options Income : $81.91
Options Yield :  2.01%Annualized Options Yield : 4.33%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $39.82Gain if Exercised : 31.85%

This covered call yields 2.01%, or 4.33% on an annualized basis. The yield on cost of my HRL position is 2.41%, so I'm boosting dividend income by a factor of 1.80. If the option is exercised, I'll sell 100 shares of HRL at a reduced cost basis of $39.82 per share, for capital gains of 31.85%.
#603 : 2020-12-18: Sold to Open 3 Contracts of Option PFE Mar 19 2021 50.00 C

I own 300 shares of Pfizer Inc (PFE) at a cost basis of $37.05 per share. I'm willing to sell these shares for $50.00 on or before 19 March:

Open Date :  2020-12-18  
Expiration Date :  2021-03-19    Number of Days in Trade : 91
Cost Basis :  $37.05 per shareGain at Strike Price : 34.95%
Strike Price :  $50.00 per share
Number of Contracts : 3Number of Shares :300
Call Premium :  $0.36 per shareOptions Income : $108.00
  Commission : -$2.21
Net Premium :  $0.353 per shareNet Options Income : $105.79
Options Yield :  0.95%Annualized Options Yield : 3.82%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $36.68Gain if Exercised : 36.30%

This covered call yields 0.95%, or 3.82% on an annualized basis. The yield on cost of my PFE position is 4.21%, so I'm boosting dividend income by a factor of 0.91. If the options are exercised, I'll sell 300 shares of PFE at a reduced cost basis of $36.68 per share, for capital gains of 36.30%.

#593 : 2020-12-18: Sold to Open 3 Contracts of Option KO Mar 19 2021 60.00 C

I own 300 shares of The Coca-Cola Company (KO) at a cost basis of $45.10 per share. I'm willing to sell these shares for $60.00 on or before 19 March:

Open Date :  2020-12-18  
Expiration Date :  2021-03-19    Number of Days in Trade : 91
Cost Basis :  $45.10 per shareGain at Strike Price : 33.04%
Strike Price :  $60.00 per share
Number of Contracts : 3Number of Shares :300
Call Premium :  $0.33 per shareOptions Income : $99.00
  Commission : -$1.31
Net Premium :  $0.326 per shareNet Options Income : $97.69
Options Yield :  0.72%Annualized Options Yield : 2.90%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $44.77Gain if Exercised : 34.03%

This covered call yields 0.72%, or 2.90% on an annualized basis. The yield on cost of my KO position is 3.64%, so I'm boosting dividend income by a factor of 0.80. If the options are exercised, I'll sell 300 shares of KO at a reduced cost basis of $44.77 per share, for capital gains of 34.03%.

For covered calls, I think an achievable goal is to earn double the dividend yield. Unfortunately, none of these covered call trades achieve this goal, though I'll earn capital gains of more than 30% on each covered call if they were to be assigned. 

These covered calls generated about $285 in options income.

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 the following put contracts in December:

#6122020-12-18:-3×XEL 19 Mar 2021 $55.00 P $       135.00 ( $          -0.04 ) 
#6112020-12-18:-1×WMT 18 Jun 2021 $120.00 P $       224.00 ( $          -0.79 ) 
#6102020-12-18:-3×WFC 19 Feb 2021 $25.00 P $       147.00 ( $          -1.61 ) 
#6092020-12-18:-1×V 18 Jun 2021 $160.00 P $       260.00 ( $          -0.79 )
#6072020-12-18:-2×SPG 19 Feb 2021 $70.00 P $       260.00 ( $          -0.88 )
#6042020-12-18:-2×PG 18 Jun 2021 $100.00 P $       146.00 ( $          -0.87 ) 
#6022020-12-18:-2×PEG 18 Jun 2021 $45.00 P $       200.00 ( $          -0.02 )
#6012020-12-18:-2×O 19 Feb 2021 $55.00 P $       180.00 ( $          -0.22 ) 
#6002020-12-18:-2×NKE 16 Apr 2021 $95.00 P $       130.00 ( $          -0.87 )
#5992020-12-18:-2×MRK 19 Feb 2021 $70.00 P $       100.00 ( $          -0.87 ) 
#5982020-12-18:-2×MDT 21 May 2021 $85.00 P $       150.00 ( $          -0.87 ) 
#5972020-12-18:-1×MCD 19 Mar 2021 $180.00 P $       145.00 ( $          -0.79 )
#5962020-12-18:-2×LYB 19 Mar 2021 $65.00 P $       190.00 ( $          -0.12 ) 
#5952020-12-18:-1×LOW 19 Feb 2021 $140.00 P $       155.00 ( $          -0.79 ) 
#5942020-12-18:-2×LLY 16 Jul 2021 $110.00 P $       190.00 ( $          -0.88 )
#5922020-12-18:-2×JNJ 18 Jun 2021 $110.00 P $       192.00 ( $          -0.88 )
#5902020-12-18:-3×INTC 18 Jun 2021 $32.50 P $       150.00 ( $          -2.21 ) 
#5892020-12-18:-2×HRL 19 Feb 2021 $44.00 P $       144.00 ( $          -0.23 ) 
#5882020-12-18:-1×HD 16 Apr 2021 $215.00 P $       180.00 ( $          -0.79 ) 
#5872020-12-18:-2×EMR 19 Mar 2021 $60.00 P $         94.00 ( $          -0.87 ) 
#5862020-12-18:-1×CVX 19 Feb 2021 $80.00 P $       282.00 ( $          -1.09 ) 
#5852020-12-18:-3×CSCO 16 Apr 2021 $35.00 P $       129.00 ( $          -3.50 )
#5822020-12-18:-2×CL 21 May 2021 $65.00 P $       140.00 ( $          -0.87 ) 
#5802020-12-18:-3×BEN 16 Apr 2021 $20.00 P $       144.00 ( $          -0.34 ) 
#5782020-12-18:-1×ADP 21 May 2021 $130.00 P $       155.00 ( $          -0.28 )


#612 : 2020-12-18: Sold to Open 3 Contracts of Option XEL Mar 19 2021 55.00 P

I'm willing to buy 300 shares of Xcel Energy Inc (XEL) for $55.00 per share on or before 19 March 2021. XEL closed at $65.67 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-03-19    Number of Days in Trade : 91
Price at Close :  $65.67 per shareDiscount at Strike Price : 16.25%
Strike Price :  $55.00 per share
Number of Contracts : 3Number of Shares :300
Put Premium :  $0.45 per shareOptions Income : $135.00
  Commission : -$0.04
Net Premium :  $0.450 per shareNet Options Income : $134.96
Options Yield :  0.69%Annualized Options Yield : 2.75%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $54.55Discount if Exercised : 16.93%

This put option trade yields 0.69%, or 2.75% on an annualized basis. At $65.67 per share, XEL yields 2.62%, so I'm boosting dividend income by a factor of 1.05. If the options are exercised, I'll buy 300 shares at a cost basis of $54.55 per share, a discount of 16.93%.

#611 : 2020-12-18: Sold to Open 1 Contract of Option WMT Jun 18 2021 120.00 P

I'm willing to buy 100 shares of Walmart Inc (WMT) for $120.00 per share on or before 18 June 2021. WMT closed at $145.95 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-06-18    Number of Days in Trade : 182
Price at Close :  $145.95 per shareDiscount at Strike Price : 17.78%
Strike Price :  $120.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $2.24 per shareOptions Income : $224.00
  Commission : -$0.79
Net Premium :  $2.232 per shareNet Options Income : $223.21
Options Yield :  1.53%Annualized Options Yield : 3.07%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $117.75Discount if Exercised : 19.32%

This put option trade yields 1.53%, or 3.07% on an annualized basis. At $145.95 per share, WMT yields 1.48%, so I'm boosting dividend income by a factor of 2.07. If the option is exercised, I'll buy 100 shares at a cost basis of $117.75 per share, a discount of 19.32%.

#610 : 2020-12-18: Sold to Open 3 Contracts of Option WFC Feb 19 2021 25.00 P

I'm willing to buy 300 shares of Wells Fargo & Company (WFC) for $25.00 per share on or before 19 February 2021. WFC closed at $29.01 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $29.01 per shareDiscount at Strike Price : 13.82%
Strike Price :  $25.00 per share
Number of Contracts : 3Number of Shares :300
Put Premium :  $0.49 per shareOptions Income : $147.00
  Commission : -$1.61
Net Premium :  $0.485 per shareNet Options Income : $145.39
Options Yield :  1.67%Annualized Options Yield : 9.69%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $24.50Discount if Exercised : 15.53%

This put option trade yields 1.67%, or 9.69% on an annualized basis. At $29.01 per share, WFC yields 1.38%, so I'm boosting dividend income by a factor of 7.02. If the options are exercised, I'll buy 300 shares at a cost basis of $24.50 per share, a discount of 15.53%.

#609 : 2020-12-18: Sold to Open 1 Contract of Option V Jun 18 2021 160.00 P

I'm willing to buy 100 shares of Visa Inc (V) for $160.00 per share on or before 18 June 2021. V closed at $211.31 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-06-18    Number of Days in Trade : 182
Price at Close :  $211.31 per shareDiscount at Strike Price : 24.28%
Strike Price :  $160.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $2.60 per shareOptions Income : $260.00
  Commission : -$0.79
Net Premium :  $2.592 per shareNet Options Income : $259.21
Options Yield :  1.23%Annualized Options Yield : 2.46%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $157.39Discount if Exercised : 25.52%

This put option trade yields 1.23%, or 2.46% on an annualized basis. At $211.31 per share, V yields 0.61%, so I'm boosting dividend income by a factor of 4.06. If the option is exercised, I'll buy 100 shares at a cost basis of $157.39 per share, a discount of 25.52%.

#607 : 2020-12-18: Sold to Open 2 Contracts of Option SPG Feb 19 2021 70.00 P

I'm willing to buy 200 shares of Simon Property Group, Inc (SPG) for $70.00 per share on or before 19 February 2021. SPG closed at $84.10 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $84.10 per shareDiscount at Strike Price : 16.77%
Strike Price :  $70.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $1.30 per shareOptions Income : $260.00
  Commission : -$0.88
Net Premium :  $1.296 per shareNet Options Income : $259.12
Options Yield :  1.54%Annualized Options Yield : 8.93%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $68.70Discount if Exercised : 18.32%

This put option trade yields 1.54%, or 8.93% on an annualized basis. At $84.10 per share, SPG yields 6.18%, so I'm boosting dividend income by a factor of 1.44. If the options are exercised, I'll buy 200 shares at a cost basis of $68.70 per share, a discount of 18.32%.

#604 : 2020-12-18: Sold to Open 2 Contracts of Option PG Jun 18 2021 100.00 P

I'm willing to buy 200 shares of The Procter & Gamble Company (PG) for $100.00 per share on or before 18 June 2021. PG closed at $139.04 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-06-18    Number of Days in Trade : 182
Price at Close :  $139.04 per shareDiscount at Strike Price : 28.08%
Strike Price :  $100.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.73 per shareOptions Income : $146.00
  Commission : -$0.87
Net Premium :  $0.726 per shareNet Options Income : $145.13
Options Yield :  0.52%Annualized Options Yield : 1.05%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $99.27Discount if Exercised : 28.61%

This put option trade yields 0.52%, or 1.05% on an annualized basis. At $139.04 per share, PG yields 2.27%, so I'm boosting dividend income by a factor of 0.46. If the options are exercised, I'll buy 200 shares at a cost basis of $99.27 per share, a discount of 28.61%.

#602 : 2020-12-18: Sold to Open 2 Contracts of Option PEG Jun 18 2021 45.00 P

I'm willing to buy 200 shares of Public Service Enterprise Group Incorporated (PEG) for $45.00 per share on or before 18 June 2021. PEG closed at $56.82 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-06-18    Number of Days in Trade : 182
Price at Close :  $56.82 per shareDiscount at Strike Price : 20.80%
Strike Price :  $45.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $1.00 per shareOptions Income : $200.00
  Commission : -$0.02
Net Premium :  $1.000 per shareNet Options Income : $199.98
Options Yield :  1.76%Annualized Options Yield : 3.53%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $44.00Discount if Exercised : 22.56%

This put option trade yields 1.76%, or 3.53% on an annualized basis. At $56.82 per share, PEG yields 3.45%, so I'm boosting dividend income by a factor of 1.02. If the options are exercised, I'll buy 200 shares at a cost basis of $44.00 per share, a discount of 22.56%.

#601 : 2020-12-18: Sold to Open 2 Contracts of Option O Feb 19 2021 55.00 P

I'm willing to buy 200 shares of Realty Income Corporation (O) for $55.00 per share on or before 19 February 2021. O closed at $59.52 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $59.52 per shareDiscount at Strike Price : 7.59%
Strike Price :  $55.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.90 per shareOptions Income : $180.00
  Commission : -$0.22
Net Premium :  $0.899 per shareNet Options Income : $179.78
Options Yield :  1.51%Annualized Options Yield : 8.76%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $54.10Discount if Exercised : 9.11%

This put option trade yields 1.51%, or 8.76% on an annualized basis. At $59.52 per share, O yields 4.73%, so I'm boosting dividend income by a factor of 1.85. If the options are exercised, I'll buy 200 shares at a cost basis of $54.10 per share, a discount of 9.11%.

#600 : 2020-12-18: Sold to Open 2 Contracts of Option NKE Apr 16 2021 95.00 P

I'm willing to buy 200 shares of NIKE, Inc (NKE) for $95.00 per share on or before 16 April 2021. NKE closed at $137.28 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-04-16    Number of Days in Trade : 119
Price at Close :  $137.28 per shareDiscount at Strike Price : 30.80%
Strike Price :  $95.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.65 per shareOptions Income : $130.00
  Commission : -$0.87
Net Premium :  $0.646 per shareNet Options Income : $129.13
Options Yield :  0.47%Annualized Options Yield : 1.44%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $94.35Discount if Exercised : 31.28%

This put option trade yields 0.47%, or 1.44% on an annualized basis. At $137.28 per share, NKE yields 0.80%, so I'm boosting dividend income by a factor of 1.80. If the options are exercised, I'll buy 200 shares at a cost basis of $94.35 per share, a discount of 31.28%.

#599 : 2020-12-18: Sold to Open 2 Contracts of Option MRK Feb 19 2021 70.00 P

I'm willing to buy 200 shares of Merck & Co., Inc (MRK) for $70.00 per share on or before 19 February 2021. MRK closed at $79.53 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $79.53 per shareDiscount at Strike Price : 11.98%
Strike Price :  $70.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.50 per shareOptions Income : $100.00
  Commission : -$0.87
Net Premium :  $0.496 per shareNet Options Income : $99.13
Options Yield :  0.62%Annualized Options Yield : 3.61%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $69.50Discount if Exercised : 12.62%

This put option trade yields 0.62%, or 3.61% on an annualized basis. At $79.53 per share, MRK yields 3.27%, so I'm boosting dividend income by a factor of 1.11. If the options are exercised, I'll buy 200 shares at a cost basis of $69.50 per share, a discount of 12.62%.

#598 : 2020-12-18: Sold to Open 2 Contracts of Option MDT May 21 2021 85.00 P

I'm willing to buy 200 shares of Medtronic plc (MDT) for $85.00 per share on or before 21 May 2021. MDT closed at $116.71 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-05-21    Number of Days in Trade : 154
Price at Close :  $116.71 per shareDiscount at Strike Price : 27.17%
Strike Price :  $85.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.75 per shareOptions Income : $150.00
  Commission : -$0.87
Net Premium :  $0.746 per shareNet Options Income : $149.13
Options Yield :  0.64%Annualized Options Yield : 1.52%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $84.25Discount if Exercised : 27.82%

This put option trade yields 0.64%, or 1.52% on an annualized basis. At $116.71 per share, MDT yields 1.99%, so I'm boosting dividend income by a factor of 0.76. If the options are exercised, I'll buy 200 shares at a cost basis of $84.25 per share, a discount of 27.82%.

#597 : 2020-12-18: Sold to Open 1 Contract of Option MCD Mar 19 2021 180.00 P

I'm willing to buy 100 shares of McDonald's Corporation (MCD) for $180.00 per share on or before 19 March 2021. MCD closed at $215.08 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-03-19    Number of Days in Trade : 91
Price at Close :  $215.08 per shareDiscount at Strike Price : 16.31%
Strike Price :  $180.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $1.45 per shareOptions Income : $145.00
  Commission : -$0.79
Net Premium :  $1.442 per shareNet Options Income : $144.21
Options Yield :  0.67%Annualized Options Yield : 2.69%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $178.54Discount if Exercised : 16.99%

This put option trade yields 0.67%, or 2.69% on an annualized basis. At $215.08 per share, MCD yields 2.40%, so I'm boosting dividend income by a factor of 1.12. If the option is exercised, I'll buy 100 shares at a cost basis of $178.54 per share, a discount of 16.99%.

#596 : 2020-12-18: Sold to Open 2 Contracts of Option LYB Mar 19 2021 65.00 P

I'm willing to buy 200 shares of LyondellBasell Industries N.V. (LYB) for $65.00 per share on or before 19 March 2021. LYB closed at $90.93 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-03-19    Number of Days in Trade : 91
Price at Close :  $90.93 per shareDiscount at Strike Price : 28.52%
Strike Price :  $65.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.95 per shareOptions Income : $190.00
  Commission : -$0.12
Net Premium :  $0.949 per shareNet Options Income : $189.88
Options Yield :  1.04%Annualized Options Yield : 4.19%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $64.05Discount if Exercised : 29.56%

This put option trade yields 1.04%, or 4.19% on an annualized basis. At $90.93 per share, LYB yields 4.62%, so I'm boosting dividend income by a factor of 0.91. If the options are exercised, I'll buy 200 shares at a cost basis of $64.05 per share, a discount of 29.56%.


#595 : 2020-12-18: Sold to Open 1 Contract of Option LOW Feb 19 2021 140.00 P

I'm willing to buy 100 shares of Lowe's Companies, Inc (LOW) for $140.00 per share on or before 19 February 2021. LOW closed at $163.20 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $163.20 per shareDiscount at Strike Price : 14.22%
Strike Price :  $140.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $1.55 per shareOptions Income : $155.00
  Commission : -$0.79
Net Premium :  $1.542 per shareNet Options Income : $154.21
Options Yield :  0.94%Annualized Options Yield : 5.48%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $138.44Discount if Exercised : 15.17%

This put option trade yields 0.94%, or 5.48% on an annualized basis. At $163.20 per share, LOW yields 1.47%, so I'm boosting dividend income by a factor of 3.73. If the option is exercised, I'll buy 100 shares at a cost basis of $138.44 per share, a discount of 15.17%.


#594 : 2020-12-18: Sold to Open 2 Contracts of Option LLY Jul 16 2021 110.00 P

I'm willing to buy 200 shares of Eli Lilly and Company (LLY) for $110.00 per share on or before 16 July 2021. LLY closed at $171.40 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-07-16    Number of Days in Trade : 210
Price at Close :  $171.40 per shareDiscount at Strike Price : 35.82%
Strike Price :  $110.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.95 per shareOptions Income : $190.00
  Commission : -$0.88
Net Premium :  $0.946 per shareNet Options Income : $189.12
Options Yield :  0.55%Annualized Options Yield : 0.96%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $109.05Discount if Exercised : 36.38%

This put option trade yields 0.55%, or 0.96% on an annualized basis. At $171.40 per share, LLY yields 1.98%, so I'm boosting dividend income by a factor of 0.48. If the options are exercised, I'll buy 200 shares at a cost basis of $109.05 per share, a discount of 36.38%.

#592 : 2020-12-18: Sold to Open 2 Contracts of Option JNJ Jun 18 2021 110.00 P

I'm willing to buy 200 shares of Johnson & Johnson (JNJ) for $110.00 per share on or before 18 June 2021. JNJ closed at $154.51 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-06-18    Number of Days in Trade : 182
Price at Close :  $154.51 per shareDiscount at Strike Price : 28.81%
Strike Price :  $110.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.96 per shareOptions Income : $192.00
  Commission : -$0.88
Net Premium :  $0.956 per shareNet Options Income : $191.12
Options Yield :  0.62%Annualized Options Yield : 1.24%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $109.04Discount if Exercised : 29.43%

This put option trade yields 0.62%, or 1.24% on an annualized basis. At $154.51 per share, JNJ yields 2.61%, so I'm boosting dividend income by a factor of 0.47. If the options are exercised, I'll buy 200 shares at a cost basis of $109.04 per share, a discount of 29.43%.

#590 : 2020-12-18: Sold to Open 3 Contracts of Option INTC Jun 18 2021 32.50 P

I'm willing to buy 300 shares of Intel Corporation (INTC) for $32.50 per share on or before 18 June 2021. INTC closed at $47.46 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-06-18    Number of Days in Trade : 182
Price at Close :  $47.46 per shareDiscount at Strike Price : 31.52%
Strike Price :  $32.50 per share
Number of Contracts : 3Number of Shares :300
Put Premium :  $0.50 per shareOptions Income : $150.00
  Commission : -$2.21
Net Premium :  $0.493 per shareNet Options Income : $147.79
Options Yield :  1.04%Annualized Options Yield : 2.08%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $31.99Discount if Exercised : 32.59%

This put option trade yields 1.04%, or 2.08% on an annualized basis. At $47.46 per share, INTC yields 2.78%, so I'm boosting dividend income by a factor of 0.75. If the options are exercised, I'll buy 300 shares at a cost basis of $31.99 per share, a discount of 32.59%.

#589 : 2020-12-18: Sold to Open 2 Contracts of Option HRL Feb 19 2021 44.00 P

I'm willing to buy 200 shares of Hormel Foods Corporation (HRL) for $44.00 per share on or before 19 February 2021. HRL closed at $47.94 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $47.94 per shareDiscount at Strike Price : 8.22%
Strike Price :  $44.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.72 per shareOptions Income : $144.00
  Commission : -$0.23
Net Premium :  $0.719 per shareNet Options Income : $143.77
Options Yield :  1.50%Annualized Options Yield : 8.69%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $43.28Discount if Exercised : 9.72%

This put option trade yields 1.50%, or 8.69% on an annualized basis. At $47.94 per share, HRL yields 2.04%, so I'm boosting dividend income by a factor of 4.25. If the options are exercised, I'll buy 200 shares at a cost basis of $43.28 per share, a discount of 9.72%.


#588 : 2020-12-18: Sold to Open 1 Contract of Option HD Apr 16 2021 215.00 P

I'm willing to buy 100 shares of The Home Depot, Inc (HD) for $215.00 per share on or before 16 April 2021. HD closed at $270.45 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-04-16    Number of Days in Trade : 119
Price at Close :  $270.45 per shareDiscount at Strike Price : 20.50%
Strike Price :  $215.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $1.80 per shareOptions Income : $180.00
  Commission : -$0.79
Net Premium :  $1.792 per shareNet Options Income : $179.21
Options Yield :  0.66%Annualized Options Yield : 2.03%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $213.19Discount if Exercised : 21.17%

This put option trade yields 0.66%, or 2.03% on an annualized basis. At $270.45 per share, HD yields 2.22%, so I'm boosting dividend income by a factor of 0.92. If the option is exercised, I'll buy 100 shares at a cost basis of $213.19 per share, a discount of 21.17%.


#587 : 2020-12-18: Sold to Open 2 Contracts of Option EMR Mar 19 2021 60.00 P

I'm willing to buy 200 shares of Emerson Electric Co (EMR) for $60.00 per share on or before 19 March 2021. EMR closed at $80.90 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-03-19    Number of Days in Trade : 91
Price at Close :  $80.90 per shareDiscount at Strike Price : 25.83%
Strike Price :  $60.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.47 per shareOptions Income : $94.00
  Commission : -$0.87
Net Premium :  $0.466 per shareNet Options Income : $93.13
Options Yield :  0.58%Annualized Options Yield : 2.31%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $59.53Discount if Exercised : 26.42%

This put option trade yields 0.58%, or 2.31% on an annualized basis. At $80.90 per share, EMR yields 2.50%, so I'm boosting dividend income by a factor of 0.93. If the options are exercised, I'll buy 200 shares at a cost basis of $59.53 per share, a discount of 26.42%.

#586 : 2020-12-18: Sold to Open 1 Contract of Option CVX Feb 19 2021 80.00 P

I'm willing to buy 100 shares of Chevron Corporation (CVX) for $80.00 per share on or before 19 February 2021. CVX closed at $87.19 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-02-19    Number of Days in Trade : 63
Price at Close :  $87.19 per shareDiscount at Strike Price : 8.25%
Strike Price :  $80.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $2.82 per shareOptions Income : $282.00
  Commission : -$1.09
Net Premium :  $2.809 per shareNet Options Income : $280.91
Options Yield :  3.22%Annualized Options Yield : 18.68%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $77.17Discount if Exercised : 11.49%

This put option trade yields 3.22%, or 18.68% on an annualized basis. At $87.19 per share, CVX yields 5.92%, so I'm boosting dividend income by a factor of 3.16. If the option is exercised, I'll buy 100 shares at a cost basis of $77.17 per share, a discount of 11.49%.

#585 : 2020-12-18: Sold to Open 3 Contracts of Option CSCO Apr 16 2021 35.00 P

I'm willing to buy 300 shares of Cisco Systems, Inc (CSCO) for $35.00 per share on or before 16 April 2021. CSCO closed at $45.44 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-04-16    Number of Days in Trade : 119
Price at Close :  $45.44 per shareDiscount at Strike Price : 22.98%
Strike Price :  $35.00 per share
Number of Contracts : 3Number of Shares :300
Put Premium :  $0.43 per shareOptions Income : $129.00
  Commission : -$3.50
Net Premium :  $0.418 per shareNet Options Income : $125.50
Options Yield :  0.92%Annualized Options Yield : 2.83%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $34.56Discount if Exercised : 23.95%

This put option trade yields 0.92%, or 2.83% on an annualized basis. At $45.44 per share, CSCO yields 3.17%, so I'm boosting dividend income by a factor of 0.89. If the options are exercised, I'll buy 300 shares at a cost basis of $34.56 per share, a discount of 23.95%.

#582 : 2020-12-18: Sold to Open 2 Contracts of Option CL May 21 2021 65.00 P

I'm willing to buy 200 shares of Colgate-Palmolive Company (CL) for $65.00 per share on or before 21 May 2021. CL closed at $85.93 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-05-21    Number of Days in Trade : 154
Price at Close :  $85.93 per shareDiscount at Strike Price : 24.36%
Strike Price :  $65.00 per share
Number of Contracts : 2Number of Shares :200
Put Premium :  $0.70 per shareOptions Income : $140.00
  Commission : -$0.87
Net Premium :  $0.696 per shareNet Options Income : $139.13
Options Yield :  0.81%Annualized Options Yield : 1.92%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $64.30Discount if Exercised : 25.18%

This put option trade yields 0.81%, or 1.92% on an annualized basis. At $85.93 per share, CL yields 2.05%, so I'm boosting dividend income by a factor of 0.94. If the options are exercised, I'll buy 200 shares at a cost basis of $64.30 per share, a discount of 25.18%.

#580 : 2020-12-18: Sold to Open 3 Contracts of Option BEN Apr 16 2021 20.00 P

I'm willing to buy 300 shares of Franklin Resources, Inc (BEN) for $20.00 per share on or before 16 April 2021. BEN closed at $25.01 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-04-16    Number of Days in Trade : 119
Price at Close :  $25.01 per shareDiscount at Strike Price : 20.03%
Strike Price :  $20.00 per share
Number of Contracts : 3Number of Shares :300
Put Premium :  $0.48 per shareOptions Income : $144.00
  Commission : -$0.34
Net Premium :  $0.479 per shareNet Options Income : $143.66
Options Yield :  1.91%Annualized Options Yield : 5.88%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $19.52Discount if Exercised : 21.96%

This put option trade yields 1.91%, or 5.88% on an annualized basis. At $25.01 per share, BEN yields 4.48%, so I'm boosting dividend income by a factor of 1.31. If the options are exercised, I'll buy 300 shares at a cost basis of $19.52 per share, a discount of 21.96%.

#578 : 2020-12-18: Sold to Open 1 Contract of Option ADP May 21 2021 130.00 P

I'm willing to buy 100 shares of Automatic Data Processing, Inc (ADP) for $130.00 per share on or before 21 May 2021. ADP closed at $179.24 per share on the date of my trade:

Open Date :  2020-12-18  
Expiration Date :  2021-05-21    Number of Days in Trade : 154
Price at Close :  $179.24 per shareDiscount at Strike Price : 27.47%
Strike Price :  $130.00 per share
Number of Contracts : 1Number of Shares :100
Put Premium :  $1.55 per shareOptions Income : $155.00
  Commission : -$0.28
Net Premium :  $1.547 per shareNet Options Income : $154.72
Options Yield :  0.86%Annualized Options Yield : 2.05%
----------------------------  ----------------------------------------------------  -----------
  Commission if Exercised : $0.00
Cost Basis if Exercised : $128.45Discount if Exercised : 28.34%

This put option trade yields 0.86%, or 2.05% on an annualized basis. At $179.24 per share, ADP yields 2.08%, so I'm boosting dividend income by a factor of 0.99. If the option is exercised, I'll buy 100 shares at a cost basis of $128.45 per share, a discount of 28.34%.

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%. All but one of these put trades measure up to that criterium!

These put options trades generated about $4201 in options income.

Concluding Remarks


After failing to achieve my 2020 goal of collecting at least $24,000 in options income, in December, I executed many trades to improve my options portfolio for the coming year. 

Part 1 of this article covered 23 trades in which I rolled forward options.

In Part 2, I presented closing trades as well as new covered calls and put contracts. The closing traadee secured $1,053 in options income, while the new covered calls aand put contracts generated options income totaling about $4,487. 

Part 3 will conclude this article by presenting two assignments, fifteen expirations, and the usual list of upcoming options expirations. 

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2 comments :

  1. FerdiS - How are you able to write so many puts? I assume these are cash secured, and even though I remember reading that you use margin at a 20% level, that still seems like you'd need giant cash on hand to write so many. Can you enlighten me? I haven't sold puts before, only calls.

    ReplyDelete
    Replies
    1. The puts I sell are not cash secured, which means you have to set aside the exact amount needed to buy an underlying position. Instead, the puts I sell are secured by my portfolio through margin leverage. I pay margin interest for that capability. I'm leveraged by about 1.85x (the last time I looked), which means I have enough equity on hand to secure the puts. That leverage is somewhat large, for sure, but well below the 4x allowed (which I'll never want to go to). You'll note that most of the puts I sell are deep out of the money, meaning the likelihood of assignment is rather small. Nevertheless, I'm assuming there won't be a catastrophic crash, which, as you know, is never a certainty!

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