September Covered Calls Trades On Dividend Stocks Update #4
Small and large dividend stock and ETF investors can use covered calls and puts trades to generate monthly income from options premiums and options trading.
By Donald E. L. Johnson
Cautious Speculator
September covered calls trades returned 23.87% annualized.
A few short duration trades boosted the portfolio’s average returns on risk.
Three of the 14 stocks were called.
September covered calls trades on dividend stocks returned about 23.87% on risks, up from about 14.53% in August.
The average annual dividend yields on the 14 stocks that the covered calls were written on in September are about 2.3%.
Including some October covered calls trades that I’ll report on in a couple of days, return on risk on 114 covered calls trades is averaging about 17.5%. These returns easily beat the yields on Treasury bonds and on cash deposited in CDs, savings accounts or money market funds.
Several of the September covered calls trades provided high annualize returns on risk because the trades were open only two to 10 days.
For example Campbell Soup (CPB) dropped enough during the first two days of a 16-day trade that bought the calls back for five cents a share and to the 162% annualize return on the net debit. In the CPB example, annualized returns assume that similar results can be achieved on similar trades every two days, or 183 times in 365 days, which is unlikely in this case. But it makes the monthly returns look pretty good. After I closed this trade, the CPB options prices were so uninviting that I didn’t roll the trade forward.
On other trades, like the two Intuitive Surgical Inc. (ISRG) covered calls trades, the implied volatility (IV) was high and so were the the options prices. And the second ISRG trade lasted only 7 days. The AROR on the first ISRG trade was 12.59% and on the second one it wa s 23.08%. Again, these two trades helped boost the portfolio’s average AROR for the month.
The Carlyle Group (CG) trade also distorted the September returns, as explained in earlier posts.
Another trade that’s not working out as hoped is my buy/write trade on Amazon Inc. (AMZN) 9.29.23 $137 covered calls. In addition to getting a 61.92% AROR on the covered calls, I have an unrealized loss on the stock. It closed Friday at $127.12 a share, down from the $136.16 I paid for it. The net debit after accounting for the covered calls and puts premiums I collected on AMZN is $133.01. That is, I have a 4.4% unrealized net loss on the trade. Sometime in the next couple of days I’ll decide what my next AMZN covered calls trade will be. Futures are up at the moment, so I may let it run higher rather than sell covers calls on it right away. AMZN is a 40% buy on Barchart.com.
Three of the 14 stocks were called during September. They include CG, Southern Co. (SO) and Exxon Mobil Corp (XOM). I sold October puts on XOM after it was called.
Because I sold SO at a small tax loss ($70-$71), I don’t want to buy it back for at least 30 days because I don’t want to create a wash sale for income tax reasons. On a net debit basis, I made money on the trade ($70 strike minus $67.87 net debit). After SO was called on Sept. 22, it sank some more and closed Friday at $64.72. SO is a strong 88% sell on Barchart.com. In other words, it may be over sold.
I replaced SO with another good dividend stock in the utility sector, Duke Energy Corp. (DUK) even though it is an 88% sell on Barchart. The annual dividend yield on my net debit is about 4.9% in an IRA account.
Last week, with nothing better to do with my cash, I added to my holdings of JPM Equity Premium Income ETFs (JEPI). At $53.56 a share, they yield 8.1% and pay a monthly dividend. The. dividend was hiked a bit for October. It goes ex-dividend on October 2. My JEPI is in an IRA.
I respond to comments on the comments section where readers’ comments are posted. That is, if you have a question about this article or other comments, I'll discuss your questions with you in the comments section below this article.
Thanks for reading Stock Picking, Options Trading for Income! Subscribe for free to receive new posts and support my work.
LINKs:
Home Page. See my more than 150 articles on options trading, stocks and watch lists. If you read several of these articles, you’ll learn how my strategies are meant to work. No guarantees. Links to useful web sites are on the lower right corner of the home page. Scroll down.
Follow @RealDonJohnson on twitter.com and FaceBook.com. Or follow me on Substack.com/Notes where my byline is my handle.
September Puts Options Trades Update #5
8 October 2023 Covered Calls Trades Yield 24.3% Annualized Returns On Risk
10 October 2023 Puts Options Trades
September Covered Calls Trades On Dividend Stocks Update #2
September Puts Options Trades Update #3
September Puts Options Trades Update #1
August Naked Puts Options Trades Yielded About 16% In Options Premiums Annualized
August Covered Calls Options Trades Yielded 14.6% In Options Premiums
September Puts Options Trades on 4 Stocks
September Covered Calls Trades On 4 Dividend Stocks
August Covered And Naked Puts Options Trades Update #3
16 Jim Cramer Stocks Are Up 12% to 205% Year To Date
AAPL, AXP, CAT, CSCO, FDX, HON, ICE, OPRA, TJX Covered Calls Update #1
August Covered Calls Trades On 14 Dividend Stocks Update #2
August Covered Calls Trades On 13 Dividend Stocks Update #1
August Covered Calls Trades On Dividend Stocks Yield 12.2% in Options Premiums
August Covered And Naked Puts Options Trades Update # 2
August Covered And Naked Puts Options Trades On Paycom And Other Stocks Update #1
August Covered And Naked Puts Options Trades Yield About 12.8% In Options Premiums.
How Owners of AT&T, Verizon, T-Mobile Can Use Covered Calls, Dividends To Offset Losses Update #1
Selling in The Money Covered Calls Can Yield Big Annual Returns on Risk. By Donald E. L. Johnson
How to Beat Inflation Tax, Bear Market Tax With Dividend Stocks, Covered Calls, Cash Secured Puts, by Donald E. L. Johnson.
How I Analyze Bullish Puts Options Trades With Stock Rover, By Donald E. L. Johnson.
Wars Breed Inflation, Rising Interest Rates, Market Turmoil, By Donald E. L. Johnson.
Calls vs Puts Options: What’s the Difference?
A video on how to place options trades on TDAmeritrade.com’s Think or Swim trading platform.
Morningstar.com call Campbell Soup (CPB) one of its 10 best value stocks to buy for the long term. Barchart.com rates CPB a 100% sell. In other words, it's over sold.