Options Expiration – July 2019

I only had one option left to expire today for the July monthly options expiration and it finished a few dollars out of the money. As my one IWM July $158 covered call expired worthless and gave me a realized gain of $240.32, I sold a new covered call on IWM. While IWM was trading at $154.99, I sold one IWM September $158 covered call for $2.49 and received $248.32 after paying $0.68 in commission.

IWM is off of its intraday high by more than $3 late in Friday’s trading as I write this post. That intraday high, just over $158, came on July 1 and was very brief since IWM closed the day $2 off that high. Since then, the small cap ETF has traded sideways for the most part and is now below its 10 and 20-day moving averages and is at risk of falling below its 100-day moving average too.

While I could have made more money using a lower strike in July and still would have taken at full profit, I’m sticking to my plan of selling further out of the money to leave more upside potential of the underlying equities on my covered calls. I am doing the same thing again for this new September covered call. I was very tempted to sell closer to the money since this is the time of year when small caps don’t do as well historically and the chart is hinting that history may repeat.

If my new covered call is assigned, I will make a 3.54% gain. That comes out to 20.25% annualized. If it is not exercised and ends up at the same price as it was today when I made the trade, I will still earn 1.6%, which is 9.15% annualized. My plan that I referenced above was to target an annualized gain of 5% from the premiums alone, but I couldn’t make myself sell that small of a premium with a chart that looks like it’s starting to roll over. I still have a chunk of cash on the sidelines that desperately needs to be put to work, so if it looks like things are taking off again to the upside I have plenty of dry powder I can use to sell more puts closer to the money or even in the money.

Today marks one week since my most recent back surgery and I still can’t sit at my desk for another week. I’m working in small spurts to cover my clients’ accounts. I planned fairly well for this week, but I’m still a little bit behind it where I wanted to be. I’m only mentioning this to explain why it might be another couple of weeks before a dig much deeper into my account again to get back to being fully invested as I should be.