Sold FEZ Covered Call ITM

I’ve been sitting on my 100 FEZ shares since my last FEZ covered call expired nearly 11 months ago. I’ve been in and out of it in my other account and never could get around to making a trade on it in this account. The main reason is that I wanted to wait for better pricing. I didn’t feel I needed to make a trade and blog about it for an ETF that was only 4% of my account. In hindsight, I should’ve made a few trades on price spikes, even if the timing wasn’t ideal.

Today, I decided FEZ had improved enough and it was time to take some profits or at least reduce my cost per share and hold on if FEZ dropped again. While FEZ was trading at $38.61, I sold one FEZ December $38 covered call for $1.33 and received $132.38 after paying $0.62 in commission.

I sold this covered call in the money because I think FEZ has gotten ahead of itself again. Today is the third day in a row that FEZ has traded above its previous trend line of lower highs. I expect it to return to this trend line for a retest of support before moving higher. Currently, that trend line is a nickel or so below $38 and declining. If support around $37.90-37.95 doesn’t hold, I could see FEZ coming back down to its trend line of higher lows, currently close to $36.50 and rising.

FEZ’s 10, 20, 50, 100, and 200-day moving averages are all below $37.50. These moving averages are ascending again, but could add to the gravity that might restrain FEZ from pushing higher much more. By selling in the money, I only leave 1.85% upside potential (9.69% annualized), but I gain a 3.48% cushion to losses and at these prices, that seemed like a decent trade off.