Contract sold on my covered call
My options sold last week, making me very little money but providing valuable experience.
- Strike Price: $77
- Expiration: Jun 06 (June 17th)
- Options sold at: $0.25
- Contract sold at: $25 ($0.25/option x 100 options/contract x 1 contract)
- Transaction fees: $8.25 ($7 trade, $1.25/contract)
- Cost basis (IWN): $76.20
- Current stock price: $72.04
Keeping my risk low, I need to maintain a strike price above my cost basis. As long as the strike price is above my cost basis, an executed option will always yield a profit. On the down side, with the stock price now $4 below my cost basis, the spread between my strike price and the current price of the stock is forcing my option price down, decreasing my profit from selling options.
To decrease the spread between the strike price and the current price two things can happen. The price of the stock can rise considerably, but I have no control over that. The second option is to buy more stock at the lower price, decreasing my cost basis, which would allow me to decrease my strike price, and maintain the same level of risk.
As the stock price moves up, I will move my strike price up with it to always maintain an out of money option. The goal is to boost return on my investment without actually selling. Even $0.25/option every couple months will boost return by over a percent. This should be the low end, unless the stock drops to a point where there is no market for options with my strike price.