Sold DSX Covered Calls

My DSX position was turning into a waste of capital for a little while, but I finally broke from my “wait and see” attitude and sold covered calls.  I only have a little over $3,000 invested in DSX (after deducting premiums received, but still that’s no reason not to make it work for me.  While DSX was trading at $8.19 this morning I sold three DSX November $8 covered calls for $0.70 each and received $207.83 after commissions.  By the time I got around to writing this in the late afternoon, DSX had fallen to $7.85 which shows I made the right move compared to either waiting longer or trying for the $9.00 strike which I considered.

By using the November $8.00 strike for my covered calls I stand to make 6.04% if the options are exercised or 53.94% annualized.  I’ll end up taking a loss on the shares themselves and the series of trades all added and subtracted together, but I’ll be out of a bad trade with little harm done.  If DSX goes back to the price it was when I made the trade and I buy back the calls on the final day of trading I still make 6.04% based on the $0.50 I’ll make from the options and will have reduce my cost per share nicely.  I don’t really think DSX will pop from here, but also don’t think the downside will be too much below $8.00.  I’ll be happy to keep re-writing these options over every other month if I can.

One lesson I’ve learned a few times in the past is not to double up on a bad investment.  I didn’t do that with DSX and I’ve kept myself from losing even more.  Today’s return to the downside for the market in general shows I haven’t learned from my other painful lessons and jumped the gun yesterday with the closing of my SDS shares.  I thought we were back on track to head towards the top of the trading range, around 1,230 on the $SPX, and wanted to make a quick buck.  That’s what I get for playing the guessing game and not waiting for a clearer signal from the technical indicators I like to rely on.

I didn’t jump back into everything at least and have saved my ammo for getting back into GLD at a better price later on.  I have other long positions I need to treat like DSX and sell covered calls.  Among those are CSX, JPM, MVV and VNQ.  I’ve been waiting for a better rally which increasingly so doesn’t look like it’s going to emerge for more than a few days at a time.  I need to bite the bullet, sell calls on these, take in the premiums and be happy if the market rallies high enough to call my shares away.