Today was expiration Friday and I had one position (contract) in Taser Int. covered call. You can see my original trade setup in this post where I am showing the entire calculation of what would happen if I buy 100 shares of the stock and sell 1 call option against the shares. This trade is called a total return covered call, because you are realizing a gain on the stock by being assigned when you are forced to sell the stock (with a gain) and you keep the premium from sold option contract as well.
This trade was only one cycle trade, that means that I didn’t have to sell more calls against this position and this position executed during the life time of the original contract.
I also hold an older covered call contract on TASR with higher strike price ($10.00 strike) for which the original call contract expired worthless and I sold another contract. That trade is still “waiting” for execution. But I am OK with it. It is a part of my strategy. I will be waiting and selling covered calls as long as the stock gets called away.
As you can see on the chart below it indicates both trades.
The upper green line on the chart is the original trade with 10 strike, which is still alive until September, when the contract is supposed to get expired or assigned. If it expires I will sell a new call contract. If it gets assigned I will end this trade with 13.47% profit.
The stock got irrationally hit on February 20th, 2013. Can you see the large price drop, the extended candle in the middle of the chart? That’s when Taser announced its 4Q results and although they beat expectations the Wall Street morons (suckers by Jesse Livermore) didn’t like it and heavily sold the stock. However, I still liked the story of this company. When you consider all the madness around guns and gun laws at that time (and today) it was obvious that this company would prosper in the long term, mainly in areas where the gun ban is adopted, such as Chicago.
So I decided to open another contract (the one which is expiring today) of total return covered call.
The second, lower green line on the chart indicates this trade. And today’s expiration is the second trade going to its finale with a nice $77.22 profit (11.81% or 42.9% annualized return).