My Covered Calls, Cash Secured Puts Trades on DHR, DOW, IWM, FDX and PFE

Pick good undervalued dividend stocks with active and liquid stock options that can be used to generate weekly and monthly income by selling covered calls and puts options.

By Donald E. L. Johnson

Cautious Speculator

• I sold covered calls on DHR, DOW, IWM and PFE.

• I sold puts on FDX and IWM.

• These trades were done at strikes that are out of the money so that the options are unlikely to be exercised.

• I’m bearish on the markets.

Today I’ve sold covered calls on DHR, IWM, DOW and PFE. I’ve sold cash secured puts on IWM and FDX. Selling puts is a bullish trade. Selling covered calls and puts are done to generate income.

DHR is $287.995. I sold DHR 9.9.22 (32 days) $290 calls for $8.80 per share on 100-share calls. Annualized return on risk (ARoR) will be about 35%. Net debit ($290-8.80) is $281.20. The probability that the stock will be out of the market (OTM) and not called is about 51%. The stock is above its estimated fair value of about $252 and I am willing to sell it for my purchase price after collect dividends and premiums on it for several months.

DOW is $52.67. I sold DOW 8.19.22 $55 strike covered calls for $0.25, or a 13.82% ARoR on the 11-day trade. The OTM probability is 83.18% and the delta is .18. I don’t want the stock to be called. Therefore, I might have to buy the options back at a loss if DOW tops $55. It’s at $52.61.

IWM is $192.76. I sold IWM 8.12.22 $203 covered calls at $0.14 a share for a 2.55% ARoR. The strike is below my purchase price. So I took a small premium to generate a little bit of income with a low delta of .06, which means the probability that the stock will be called is about 6%.

PFE is $49.025. I sold PFE 8.26.22 $52 strike covered calls for $0.28, or a 10.53% ARoR on the 18-day trade. The delta is .15 and the OTM probability is 86%. I don’t want this one to be called.

IWM is $192.17. I sold IWM 8.19.22 $163 puts for $0.40, or a 17.6% ARoR. The margin of safety (MOS), or strike discount from the current price, is 5.9%. I would like to add IWM shares and lower my average purchase price. The OTM probability is a high 90% and the delta is a very low -.06. That means the exchange traded fund is unlikely to be assigned when the puts expire.

FDX is at $229.90. I’m short FDX 8.19.22 $200 strike puts. I sold FDX 8.26.22 $210 strike puts for $1.17. The ARoR is 10.3%. The delta is -.12. The OTM probability is 86%. I’d like to buy FDX at $200 to $210.

Beware. Like all investing, trading stocks and options is risky. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I own and/or have options positions on IWM, DIA and other equities. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content nor for any links.

@realDonJohnson. Because I don’t want to litter subscribers’ in boxes with emails, I write only one or two newsletters a day. I’m active most days on twitter where I tweet about stocks, options trades and other topics.

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