Friday, May 28, 2021

Expired Options (May 2021)

Shortly after options expiration, I try to post an article to report on expired options and any actions I took in the week leading up to options expiration. 

Sometimes, an option is at-the-money or even in-the-money, and, consequently, the risk of assignment is high. To avoid assignment, I'd need to either close the option, or roll forward the option to a later expiration date. 

This article covers the options that were scheduled to expire on 21 May. 

When options expire, the obligations I have related to those options go away. For puts, the margin set aside as collateral gets released and the possibility of having to buy shares goes away. Likewise, for covered calls, the possibility that my shares will be called away goes away. I consider the options income associated with expired options to be secured

Recap


Here is a summary of the options that were scheduled for expiration on 21 May, as reported in my last Options Update article:

May 2021:

#6292021-03-16:-1×NOC 21 May 2021 $270.00 P $       330.00 ( $          -0.24 )

#6242021-03-16:-1×HSY 21 May 2021 $140.00 P $       155.00 ( $          -0.29 )

#6202021-03-16:-1×CAT 21 May 2021 $180.00 P $       136.00 ( $          -0.79 )

#5792020-12-18:-1×AFL 21 May 2021 $50.00 C $       115.00 ( $          -0.69 )

All but one of these options expired on 21 May. The exception is the call option on Aflac Incorporated (AFL), which got assigned on 17 May, a few days before the May expiration date. 


Expired Options


Northrop Grumman Corporation (NOC) closed at $370.46 per share on options expiration day, about 37% above the $270 put option I'd sold. As a result, the option expired and I secured about $330 in options income. 

NOC is trading for about $370 per share. 

The Hershey Company (HSY) closed at $173.76 per share on options expiration day, about 24% above the $140 put option I'd sold. As a result, the option expired and I secured about $155 in options income. 

HSY is trading at around $173 per share. 

Caterpillar Inc (CAT) closed at $237.24 per share on options expiration day, about 32% above the $180 put option I'd sold. As a result, the options expired and I secured about $135 in options income. 

CAT is trading for about $241 per share. 

As a result of these expirations, I secured options income totaling about $784. 

Assigned Options


On 17 May, which happened to be the ex-dividend date of AFL, the stock traded around $56. Therefore, the option was deep-in-the-money, and my 100 AFL shares got called away. The assignment secured $114 in options income. 

Expecting the assignment, I bought 100 shares of AFL on the morning of 17 May. Doing so ensured that I would receive the dividend regardless of what happened with the covered call. I could have also bought back the covered call and the end result turned out to be the same. 

AFL is trading at around $56.82 per share.

Summary


Of the four short options that were scheduled to expire on 21 May, one got assigned early and the others expired As a result, I secured options income totaling about $898 and I no longer have any related obligations. 

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3 comments :

  1. This week i am expecting my AMC call to get called ,sold a covered call for $14.50 strike price and its trading at $28 today

    ReplyDelete
    Replies
    1. Now over $34. I guess there's excitement in the air that people might be going back to the movies...

      Sometimes, stocks just run away and you wish you could just turn back time and not sell that covered call!

      Delete

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