This week has been busy for me. I had a lot of option expire for clients last Friday and spent some time in the first part of the week repositioning their holdings and by the second half of the week I was glued to the Tour de France. I know, not a money maker for me, but it’s my one big distraction each summer. After today’s stage I got back down to business and finally made a move on my 200 Aflac (AFL) shares.
On Monday AFL hit the same low that it’s been bouncing around for the past several weeks. I thought support would hold there so (luckily) I didn’t jump on selling covered calls too early in the week. By today it was up more than $2.00 from those lows and I figured selling out of the money calls would be worth the trade now. While AFL was trading at $46.46 I sold two AFL November $50 covered calls for $1.50 each and received $299.13 after commissions. I’m looking at AFL as a somewhat long term hold for me. (That means more than two months.) It’s down now, but has a 2.6% dividend yield that will help me while I wait for it to recover.
Today’s trade brought my cost per share down to $47.84. This means if my 200 shares are assigned at $50 I’ll do OK for a stock that sank after I entered into my position. If AFL stays flat through expiration I’ll have a 9.78% annualized return from these premiums. If I add in the dividend to help reduce my cost per share it makes it a reasonable position to stay long with relatively little downside risk. I thought about selling these covered calls closer to the money for a bigger premium, but opted to take a chance and see if AFL can recover again towards the high end of its trading channel. Now that I’ve made the trade and written this up, I noticed the top of the trading channel for the past two months has been around $47.50. I might end up rolling these calls lower before they expire.
I have 10 separate option legs expiring in August. That’s only four weeks away before a lot more cash/margin opens up for me. Most of these positions are going my way so far which means I need to start thinking of what I can replace for more exposure soon. As of this afternoon I have a limit order open for a new naked put on MVV. I’d like to add more on UWM and SSO too, but want to find the right day and strike to make the best trade for me. Next week should be more active for me as I start to take on more risk/exposure. I won’t go overboard until I’m even more convinced my covered calls will be assigned and my naked puts won’t be.
It’s been over a month since I exited my VXX position so I’m able to trade it again with no issue from the wash rule. I priced out various vertical spreads to try to profit from the consistent drop in price it typically offers. That was on Monday and I was hoping it would edge higher before I pulled the trigger. Instead it sunk to close to my target price for the short term. With this dog it’s probably never too late to short it, but I’ll wait longer anyway. I’d rather enter my bearish position on a day it’s moving higher, not after a week of it moving lower.