Profile image
By My Trader's Journal (Reporter)
Contributor profile | More stories
Story Views

Last Hour:
Last 24 Hours:

Sold DIS Covered Call for February

Wednesday, January 11, 2017 11:45
% of readers think this story is Fact. Add your two cents.

Disney ($DIS) is the only stock I have in my account right now and have been trying to decide if I should exit with a loss or hold on for a gain. I chose the latter and plan to make this work through a covered call. While DIS was trading at $109.30, I sold one February $110 covered call for $2.45 and received $244.32 after paying $0.68 in commission.

My cost per share is $112.01 after deducting the $2.99 premium I received from my original short put that was assigned. If this February covered call is assigned, I’ll have a gain of $43.00. It’s not much, but it’s a gain. This total doesn’t include the $149 in dividends I received since being assigned the shares. At this point, I just wanted to get out close to breakeven for tax purposes before I start over.

Looking back on what I gained or lost on a trade is good for learning from mistakes and successes, but it’s not what should usually drive a trade decision, outside of a tax implication if I’m are close to a gain becoming classified as long-term. The more important deciding factor is how much can you gain with acceptable risk when making a trade. For this DIS covered call, I will make 2.88% if it is assigned, which translates to 15.57% based on the 9.6 weeks to go before expiration. If it isn’t assigned and miraculously stays flat, I will make 2.23% (12.1% annualized) on the premium alone. That 2.23% potential gain on the premium is also the cushion I now have from a further loss if DIS drops again.

While I still like DIS, I need to clear it out of this account that I share with my wife. We’re moving slowly to get our new accounts open, but hope to be up and running before this February option expires so I can sweep this cash into one of our new accounts. A nice benefit to being in cash right now with 95% of my taxable funds is that I’m not too bullish in the near-term. If I had cash to invest, I’d only be looking at farther out of the money naked puts with low potential returns.


We encourage you to Share our Reports, Analyses, Breaking News and Videos. Simply Click your Favorite Social Media Button and Share.

Report abuse


Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories



Top Global

Top Alternative



Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.