Expiration Friday – 13.71% gain

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
Strike: $9.00
Sold 1 Covered Call: $0.52
Total Purchase: $766.00
Commissions: $8.78
Total purchase: $774.78
   
Expected Option Assignment: $900.00
Option Assignment Fee: $19.00
Expected Proceeds: $881.00
   
Expected Net Gain: $106.22
Expected ROI: 13.71%

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.

Happy Trading!







4 Responses to “Expiration Friday – 13.71% gain”

  1. CI says:

    That’s a nice gain there!

    Have you considered switching brokers? A $19 assignment fee is pretty steep! I wrote a few covered calls in the past with positive results until one was eventually called. I was shocked that I had to pay an additional fee and really made me reconsider what I was doing especially since I did not want to lose the position. Anyways fidelity offers $7.95+$.75, $7.95 assignment last time I looked. I know other brokers are even cheaper.

    Keep up the good work!

    • admin says:

      I was, but I am very conservative person. I opened accounts with Scotttrade and Fidelity, but none of them approved me for options trading as I have with TD Ameritrade. With TD I have the highest tier approval, so I can write naked puts. I do not know about any other broker at this moment. So I count my trades and potential profits having this huge fee in mind.

  2. admin says:

    Thanks for stopping by Marvin. Yes I can already see the effect on the overall portfolio. On monthly basis I am beating the market and those proceeds are a great help growing my portfolio.

  3. Congrats Martin! That’s an awesome return, keep on with these and you’ll be able to retire in no time!