8/7/21 – Recall we have a 26$ call we sold. Earnings helped this trade out, and the $UIS closed Friday at $24.83. If we subtract out the premium received from all the sold calls ($1.21), our true cost basis is $23.62 at expiration, which means we could have a profit of $121 dollars if nothing changes between now and 9/17. We will break even as long as the stock stays above $24.29 (Entry of $25.50 – premium collected $1.21). If you are sick of this trade and want to bail, the call we sold last week collected $0.59, and is now worth $0.80, so we have a loss there of about $0.21, but netting out the stock’s price of $24.83 and other prior premium collected is $25.50 – $1.00 or $24.50, meaning you could close this Monday morning for a theoretical profit of $33 total. Yes, you can sell the stock for less than you paid for it and still make a profit because of covered calls! Jerry is going to wait an hold as the stock seems to be trending upwards, and broke Bob’s key resistance of $23.90 (blue line below). We also have 41 DTE (Days Till Expiration) and as readers know, we like to close closer to the 21 DTE.
8/1/21 – Let’s be realistic, this trade is not going how we planned, so our goals have slightly changed. We are trying preserve capital and slowly chip away at our cost basis to break even. I’ve combined Bob’s take on UIS from a TA perspective with where we are today, and what our plans are for the future.
Bob’s Take from a TA Perspective: Yellow zones are demand zones. Green Line is a potential stop loss if you want to pull the ripcord (Jerry does not recommend this unless you need the capital back). Blue line is the resistance to break, to get back into “breakout mode – 23.90). Needs to break above 25.55 to gain momentum. Break and Hold above 28.60 to make a higher high.
Options Summary as of August 1st, 2021
- Spent on the stock: -$2550
- Collected & Closed on Call #1 (sold) : +$61
- Sold Call #2 : +$60 (total collected $121).
- Stock is trading at $22.35 today, so that’s $2550 – $2235, a loss of -$315, however since we have collected $121 from our 2 calls, lowering our cost basis to $2429, and our total loss to -$194
- Assuming we hold Call #2 until expiration until September we can keep the full $60. If we keep getting 60$ premiums and the stock doesn’t move anywhere, we’ll break even if we repeat this exercise 3 more times, possibly in December.
Note that UIS has earnings on 8/2/21, that might just provide the catalyst we need if they are positive.
7/20 – Mr. Market has been all over the place lately. Right now UIS is trading around 22.26 and we can sell a September 17th 26 strike call for around 60$.
7/13 – UIS is down today -$1.41, and the call we sold is up to 61$ in profit from the initial $100 collected, (61% of the initial 100$ premium). I bought back the call here for 39 cents to keep 61$ in premium–that’s 10% over the 50% profit target! Now, UIS is down and your net profit is negative, but you can continue to sell calls against this out in time, and/or lower strike as well. I’m personally going to wait a few hours/days to see how the stock behaves and then will most likely repeat and sell another call.
7/10 – Still nothing to do here. UIS has had a pretty wild week here. It’s basically slightly below my cost basis so from a holding perspective, we’re only down about $7. However the short 28 strike call we sold in June has depreciated from about $100 to $70, netting us almost 30$ in profit. That is 27$ away from our target of 50$ (50% of the 100$ premium collected) and we still have a lot of time before earnings in August. Gonna sit tight and continue to watch this. I love the theta decay of $1.74, which is the amount I collect daily from time passing–even on the weekends while the market is closed!
7/2 -DO NOTHING HERE – UIS has not done a whole lot in the last few weeks which is fine for our covered call position. It’s currently trading a few cents below our initial entry, so we’re down in the stock, but the 28$ call has depreciated in value (theta decay) so the option is worth less and we can buy it back to close for cheaper. Currently the net PnL is -$30.00 but let’s continue to wait as there’s nice support at 24, and the option time value should continue to decay. Soon (before 8/3 earnings) we’ll decide if we want to roll it out in time or close the whole position (for a profit we hope!)
6/26 – Weekly Summary – Entered this position on Wednesday 6/23 and UIS as appreciated to 26.03. This is good. The call has appreciated in value from $100 to $125. While this sounds good, it’s a call we sold so now I need to net out -$25 from the gain of about 39$. Over time, the value of the call should start to decrease. I’d say this week the covered call went well, and I’m not making any changes or adjustments. My plan is to buy back the call at 50% of the premium received, or 50$.
6/23 – I love covered calls. Right now UIS has earnings on 8/3/21 has an Implied Volatility Rank of almost 30%, which means you’ll get more premium than usual. For $25.50, consider buying 100 shares of UIS and consider selling the August 20th 28 strike call against it, collecting between .90 and 1.05. You will break even if the stock is above 24.50, but my plan is to sell and possibly roll out another month at 50% before the 8/20 earnings event, collecting around 50$ for the call, and all stock profits up to 28$. Should it exceed 28$ you can hold until expiration and collect up to $350.
For more info on covered calls, check out some of our prior posts on the topic: