Tomorrow will be the time to reap the profits, harvest the gains or count the loses. Since the day I decided to trade only covered calls and cash secured puts and buying dividend stocks my goal was not to lose a penny. As Warren Buffets says it.
Easy said, difficult to do. I have a couple of options trades which are not going well as far as now, but I have plenty of time to wait since the expiration day is far away and a lot of things can happen until then. So there is no need for panicking.
I hold a covered call of MBIA (MBI) stock, which is now deep in the money and that means it will get execute tomorrow. The option will be exercised and I will be required to sell my shares of MBI.
The guy on the other side will make nice profit. He will buy the stock for $9.00 a share and sell it for 10.95. Very nice gross profit of $1.95 a share. He paid 0.52 to buy my call, so his net profit (without commissions) will be 1.43 per contract.
But what about me? will I lose money?
This trade didn’t go well from the beginning and later I was even considering closing the ugly trade. But as many times in the past, the ugly ducklings turn into nice swans, this trade also turned to be a swan. If you remember, I opened this trade with a purpose of being assigned. It was my goal to get assigned because it was how I could make money on this trade.
Here are the trade details:
|Bought 100 shares MBI:||$8.18|
|Sold 1 Covered Call:||$0.52|
|Expected Option Assignment:||$900.00|
|Option Assignment Fee:||$19.00|
|Expected Net Gain:||$106.22|
The call option is deep in the money, and it is very unlikely that it falls below $9.00 a share tomorrow, so I can consider this trade as victory and Count the Money…
My other options have expirations in March, May, July and August 2013 and there is a plenty of time (value) in those options.