Slow and steady…
May was another “up” month. Definitely not as dramatic as April, but I’ll take a win any day!
I closed four trades with only a single loser for the month. I sold covered calls on both CLF and TRN with no intent of rolling either trade if they were close to closing ITM. Apparently the market gods believed I already received too much torture over these two stocks and allowed me to close them OTM.
Just as a little side note, I’ve made my peace with both of these stocks and will continue to sell covered calls against them until they are called away. I think I’ve finally hit the “acceptance” point in grieving my losses on these two and am willing to part with them when the market gods deem fit…though it won’t keep me from trading them in the future!
I also traded a very unexciting put against Alcoa (AA) since it had relatively high volatility at the time. I closed it out near my 50% target, but only walked away with about $12 in profit.
I’m sure some of you are thinking, “Why even make the trade?” Honestly, I thought about not making this trade, but I was feeling stagnant in the market and wanted to get in an additional trade for the month.
So, on to the loser for the month…JC Penny (JCP). I initially sold a put against it on 5/29 unknowingly right before a significant drop in the stock (click here to see the chart).
Of course I didn’t know the drop was coming, but I did know that if it dropped it would likely fall to around $7 and hang out around there. As you can see from the chart it promptly did exactly that.
Why sell the put then? Here was my thought process going into the trade.
I would sell the put for a bit of a credit ($.41) which would lower my break even on the trade to $8.62, taking into account a $3 commission. If the trade were to break through my strike price (which it did), I would then roll it out in time (which I did). At which point I would collect an additional credit, lower my break even point even lower and then be able to sell the $8 call against the stock if assigned.
This is where my plan ran into a bit of a bump. When I looked at the available options to roll my trade to, only August options provided enough of a credit to make it worth my while. Honestly, I’m not sure why July options weren’t showing in the ThinkorSwim platform, though I’m sure this is a lack of understanding on my part and a point for further education.
Anyway, this got me thinking along the lines of my original options trading thesis of treating them like a rental property versus a stock and continually moving into and out of the stocks. To this end I have a few trades on which will put to the test this theory of moving in and out of stocks.
In my growth as a trader, I’ve discovered my “novel” thinking isn’t quite the epiphany I thought it was and you can probably Google “Wheel of Fortune” (no, not Pat Sajak and Vanna White) and “Options” and find a description of this strategy on the web.
If you give this a shot, let me know what results you come up with! I’m sure this is just the beginning of the JC Penny trading saga as it was with CLF two years ago, so keep an eye out for next month’s income report to see how it turns out!
I hope your trading is going well and I’d love to hear from y’all. Feel free to drop me an email at email@example.com, leave a comment on the site or catch me on Twitter @optionstudent.
Until next month!
May Net Option Trading Income: $32.25
May Dividend Income: $7.56
Total May Income: $39.81
Total 2016 Net Income: $367.62
Current Dividend Stock/ETFs Holdings
|Symbol||# Shares||Quarterly/Monthly Dividend Per Share||Annual Dividend Per Share||Cost Basis||Yield||Pay Month|
|JNK||10||$.189 (monthly avg)||$2.27||$33.95||6.68%||M|
A = (Jan/Apr/Jul/Oct) B = (Feb/May/Aug/Nov) C = (Mar/Jun/Sep/Dec) M = Monthly
May Dividend Payments
|Stock/ETF||Total Dividend Paid|
May’s Option Trades
|Strategy||Stock/ETF||Option||Entry Price||Exit Price||Commission||Net Profit||% Gain/Loss||# Lots|
|CC||CLF||Jun 16 $4.5 Call||$.31||$.12||-$6.11||$31.89||61.29%||2|
|CC||TRN||Jun 16 $21 Call||$.56||$.25||-$3.07||$27.93||55.36%||1|
|P||JCP||Jun 16 (W) $9 Put||$.41||$.79||-$1.50||-$39.50||-92.68%||1|
|P||AA||Jun 16 $9 Put||$.31||$.16||-$3.07||$11.93||48.39%||1|
CC = Covered Call P = Sold Put -Rx = Roll #X from previous trade