Option Recap - June 2018
|Option Activity Recap - June 2018|
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.
|Monthly Option Activity Recap - June 2018|
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.
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.
|Nike (NKE) Price Chart|
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.
|Nike (NKE) Option Trade|
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?