I’ve sat on my Intel (INTC) shares for a while without selling covered calls, but decided to change that this morning. I’m glad I didn’t panic at the lows a few weeks ago, but clearly should’ve sold covered calls back in June or July soon after these shares were assigned and my losses began stacking up. While INTC was trading at $18.97 I sold three INTC November 19 covered calls at $0.73 and received $217.01 after commissions. I finally gave in to the lure of the premiums based on my belief that INTC has had a good run already and appears to be cooling off with the rest of the market now. If INTC does make it another leg higher I don’t think it’ll get over $20 in the near term which will make my call about break even if INTC heads north at all. If not I’ll be able to sell more covered calls in the future while I continue to collect the 3.3% dividend yield.
My September Morgan Stanley (MS) strangle worked out perfectly for me by finishing between my put and call strikes which allowed me to take a full profit on both sides. I decided to give it another try for November expiration, but this time I used lower strikes. While MS was trading at $25.30 I sold one MS November 23 naked put at $0.70 and sold one MS November 27 covered call at $0.71 and received $138.97 total for the strangle after commissions. I went with the lower strikes this time because I decided to keep my downside risk a little bit more limited with my put and wanted more premiums overall too. The only way to do that was to lower my call strike too.
I still see $28 as a pretty solid ceiling for MS and by writing a covered call that just falls short of that I should be close to getting as much profit as I would have if I didn’t sell the option (assuming MS finishes at November’s expiration at the top of its trading range). By selling the covered call I reduced my cost per share though and can use this cash elsewhere in the meantime. My cost per share is down to $24.99 now which opens me up to a fairly strong possibility that I’ll end this series of trades with a profit eventually even though I’ll be taking a loss on the shares at some point almost certainly.
I’m still considering a strangle on JPM, but haven’t picked my strikes yet. Before I decided to sell the MS strangle I was even thinking of selling a JPM Straddle with both put and call strikes at 40. I have an alert set up to buzz me if JPM falls below $39.67 which was its intraday low after breaking out on September 9th and again on the 10th. I have another alert set up for when it gets back to today’s intraday high of $40.84. Once one of those hits I’ll pick my strikes and sell. I doubt it’ll be a straddle though. I’m thinking of another strangle again for now.