Option Recap - June 2018

Option Strategy | Active Income | Financial Independence
Option Activity Recap - June 2018
Whenever I was laid off back in April 2016 I had a fairly sizable amount of cash in my 401k that I was set to rollover into an IRA.  With a large amount of cash on hand I wanted to explore a more active approach to generating income from my portfolio as opposed to the rather mundane dividend growth investing.  Don't get me wrong I love dividend growth investing, but I also want to look for ways to get to financial independence sooner rather than later.  

So I embarked on a strategy to trade options in order to generate a higher income from the same capital base.  There's more risk involved, especially if you venture into underlyings that you aren't willing to own, but the income generation can be quite substantial.  

For the bulk of my option trading capital I stick with fairly simple things such as selling puts or calls and don't venture into the more complicated strategies that are out there.  

The results for 2017 were fairly solid and encouraging, although the one way move higher in the markets meant that I missed out on potential gains as opposed to just buying the market.
Active Income | Options Trading | Profits
Monthly Option Activity Recap - June 2018
Well, June ended up back in the red with my worst month ever for options trading.  Honestly though, all things considered it wasn't a horrible month because it was really just one position that did the bulk of the damage.  Through the first half of 2018 I've generated net profits, before tax, of $7,323.47.

If you're interested in using options, TastyWorks is one of the cheapest brokerage firms out there with just $1 per contract commissions to open and $0 to close.  Commissions on stock purchases are $5.  If you sign up for an account through this link and deposit at least $2,000 I will receive a referral credit that can be redeemed through TastyWorks' referral program.

Trade Recap

The trade I want to highlight for June was the position that caused me the most issues although I'm still not mad about that because I still improved my situation.

The trade in question was a simple covered call position in my Rollover IRA on some shares of Nike.  On April 19th I opened a covered call position with a $66 strike that expired May 25th and received $130.35 in option premium.  At the time Nike shares were trading for about $65.

Below you'll find Nike's price chart that covers the time that the trade was on.
Options Trading | Active Income | Stock Price
Nike (NKE) Price Chart
Unfortunately Nike's share price went on a huge run in the time that position was open climbing from ~$65 the day the position was opened up to around $71 when I made the decision keep the dream alive by rolling the position out in time.

On May 25th I chose to roll the covered call out to the July 6th expiration to buy me more time and collect some additional premium.  I settled on the July 6th expiration because earnings were expected to be the following week.  I was able to collect an additional $53.66 in option premium bringing my net credit up to $184.01.

However, when it rains it pours and shortly after I had rolled the option to the July 6th expiration the expected earnings date, and then confirmed earnings date, moved into my expiration cycle.  That meant I wouldn't see as much of the option premium be eaten away by time compared to usual.

On June 29th I decided to close the position entirely.  At the time Nike shares were trading for ~$79.  Closing the position cost me $1,447.64.  Ouch!

The trade ended up being a $1,263.63 loss.  That one hurt a bit and like I said that one trade alone is what swung my month into the red.  
Option Trading | Option Profits
Nike (NKE) Option Trade
That was obviously a disappointing trade; however, it's not as concerning as it might look.  That trade lost me $12.63 per share, but keep in mind that I still own the shares that had appreciated from ~$65 to ~$79 during the time the position was open.  That's $14 per share of intrinsic value that I gained on the shares.  So net-net I'm still in better shape by $1.27 per share or $127.  

Since closing this position I've also traded 2 other times around my Nike shares with options and clawed by another $152.88 to help offset the previous loss.


Options trading has been a fun undertaking and something I will continue to explore going forward.  My desire/attention for it might wane since it does require a lot more activity than just passive dividend growth investing, but the results so far are promising as a way to generate more return/income via option premium than from dividends alone.

If you'd like to check out my option trades in between updates feel free to check out my Option Summary page that I update usually on a daily basis.

Also if you're interested in options trading or have any questions feel free to leave a comment or shoot me an email.

Do you utilize an option strategy on top of your core dividend growth investing?  


  1. Interesting. With the huge run up in price, why didn't the buy exercise the $66 price? Thanks.

    I meant the buyer.

    1. David,

      There's a lot of reasons for that. One being that there was still extrinsic value left in the long call position, i.e. that the call option was worth in the market more than the intrinsic value which is the current share price less the strike price. Another reason is that the long call holder has unlimited upside potential so they might have wanted to hold out for more. And yet another reason is that a long call position is much cheaper from a capital use standpoint and they might not have wanted to actually take ownership of the shares because that would have entailed outlaying $6,600 to buy them from me compared to whatever they had paid for the call option.

      But those are the main reasons why you wouldn't execute the option and call the shares away from someone.

      Thanks for stopping by!


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