New Covered Calls on ITRI, AVAV, & CSX

I’ll admit I got a little excited about the prospects of a little rally this morning while I was long so many positions still open long without covered calls.  That misplaced euphoria vanished quickly as the markets retreated.  By noon I had already sold three covered calls and I’m still debating some others.

While ITRI was trading at $56.84 I sold one October $60 covered call for $2.15 and received $213.99 after commissions.  If these shares are called away I’ll take a big realized loss on the shares, even when accounting for the premiums I’ve taken in.  I didn’t want to completely exit the position yet because I still believe in ITRI longer term and taking in $200+ on $5,684 backing it is a nice return on its own, assuming ITRI doesn’t keep falling.

While AVAV was trading at $23.00 I sold two October $22.50 covered calls for $1.70 each and received $338.57 after commissions.  AVAV is below where I started and I have a paper profit on it already, but think the risk is somewhat low that I’ll take a loss by stretching this position out for another couple of months.  Taking in $1.70 while $0.50 in the money is basically the same as taking in a $1.20 premium at the money, but with a higher probability the option will be assigned.  $120 on $2,250 is also a good return in eight weeks which is why I decided to keep it in my portfolio for now.  I sold in the money to increase my chances for a profit and hopefully to exit the position in October and free up some more cash. 

While CSX was trading at $48.84, more than a dollar off its high of the morning, I sold two October $50 covered calls for $1.90 each and received $379.07 after commissions.  I really debated holding off on these options because CSX is at the bottom of its trading channel and I won’t be surprised to see it pop back into the low to mid $50s before too long.  I decided to go ahead and take some early profits in the form of covered calls based on my concern that I could be wrong and this correction could go deeper than I expect.  If CSX does rise to the occasion and make it back above $50, I’ll still end the series of trades with a profit, even after buying my shares at $52.50.

I’ve yet to pull the trigger on MSFT, INTC, CVS, JPM and MS.  The latter two I’ll probably sell another strangle on this week.  The first three all seem to have room to move much higher in the near term and I’m trying to be patient.  I was close to selling covered calls on CVS because the premiums aren’t too bad, but it kept climbing and I didn’t want to get in its way.  Now I’ll have to hope that wasn’t a one day event, but the start of something longer term.  I have little doubt I’ll end my series of trades on CVS with a profit, but don’t want to just give it away.  That said, I’m close to being in the mood to wipe the slate clean with my losing positions and starting with a new batch to work higher.