Welcome to another Monthly Options Income post.  In these posts I discuss my various options activity, and report on my options income for the month, and year-to-date.

Here’s some background before I dive into the details of my options activity this past month.  Readers can skip the Background section if familiar with my previous options income posts.

 

Background

Last year I decided I’d try to generate some additional income by writing options contracts.  The plan is to use any options income I realize to help make additional purchases in my dividend Portfolio.

I write covered calls for a stock that I own and don’t mind selling at a selected strike price.

I write cash-secured puts for stock positions that I don’t own and wouldn’t mind buying at a selected strike price.  I also write cash-secured puts for stocks that I already own but wouldn’t mind adding more of at that price.

Ideally, the contracts I write will expire “out of the money”, my gain being the collected premium for writing the contract.  Alternatively, I may buy the contract to close it prior to expiration.  This might be done if I can capture the majority of the premium prior to expiration, or to avoid having the option be assigned to me.  In the case of Assignment, the option holders end up exercising their right to buy the underlying stock (in the case of a call) or sell the underlying stock (in the case of a put) at the strike price should it move “in the money” prior to expiration.  As the option writer, an assigned call means I sell the shares, and an assigned put means I buy the shares.

 

Options Activity

Below is a snapshot of my options spreadsheet, which I use to help keep track of the options activity.  The entire spreadsheet is not shown, just the options that had activity this past month.

Recent activity was a bit muted, but only in the sense of having a smaller number of options being set to expire this month.

As you can see, I wrote 3 options during the month (a normal amount) – two put options and one call option.  However, only 1 option was set to expire this month, and the others in future months.  Unfortunately, this limited the realizable premium income for this month.

More details on these options are in the sections that follow.  Note – the options #s in the sections below correspond to the numbers in the table.

 

Notes: Open DTE = Days To Expiration at the time the contract was opened, DOC Price = stock price on Date Opening Contract

Even though I collect the premium for writing the contract up front, I don’t realize the income until the contract is Closed or Expired.

If a put option is Assigned, the premium decreases the cost basis of the purchase.  If a call option is Assigned, the premium will increase the amount realized in the sale.

 

Previously Opened Options

I did not have any Open options at the end of last month.

 

Newly Opened Options

Once again, familiar names for my written options.  I wrote a put option for Comcast (CMCSA), a call option for HanesBrands (HBI), and a put option for Air Lease (AL).  All 3 of these stocks have seen previous options activity for me in 2018.

Option #17 – PUT CMCSA (COMCAST CORP) $31.50 EXP 06/15/18, premium = $55 (after commission)

I followed up last month’s CMCSA put option (which expired) with another at the same strike price ($31.50).  Since my CMCSA position is nearly the smallest in my Portfolio, I wrote another put option in an attempt to double my position and average down should the put be assigned.

At the time I wrote this option, CMCSA was trading for ~$31.78, or about 0.9% higher than the strike price.

Should this option expire out of the money, the $55 premium I would collect on the $3,150 I must reserve for the 21 days to expiration in case of assignment, translates to an annualized yield of 30.35% on that money.

Should this option be assigned to me, the $55 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $3,095, or $30.95/share (prior to any commission).

 

Option #18 – CALL HBI (HANESBRANDS INC) $22 EXP 07/20/18, premium = $25

Back in February, I had 100 HBI shares assigned to me at $20.60 (after factoring in the $40 premium and the $21 strike price).

HBI shares sank into the $16 range over the next quarter, but recently made a nice recovery back to $21.  The shares had risen up to the $21 level in such a short time that I thought it would be a good time to write a covered call on those shares I acquired in February.  I figure if the call option does get Assigned and I have to sell 100 shares, that I would be doing it for $1.65/sh. more than I paid for them.  Since I have over 300 HBI shares, selling a portion of them is acceptable.

At the time I wrote this option, HBI was trading for $20.90, or 5% lower than the $22 strike price I selected.

Should this option expire out of the money, the $25 premium on the $2,090 value of the shares for the 38 days to expiration, translates to an annualized yield of 11.49% on that money.

Should this option be assigned to me, the $25 premium would add to my sale proceeds, resulting in a total of $2,225, or $22.25/share (prior to any commission & SEC fees).

 

Option #19 – PUT AL (AIR LEASE CORP) $45 EXP 08/17/18, premium = $200

With this option I extended the days to expiration I usually select.  The 64 days to expiration on this option is my longest yet, probably a good 30 days longer than typical.

In addition, I wrote an option that was already in the money… just the 3rd time I’ve done that.

Given the above, I stuck with a stock I know well in AL.

The extended DTE, and the option already being in the money, led to a higher premium than I normally see.  If I can realize the $200 premium on this option, it would be my largest yet.

At the time I wrote this option, AL was trading for $44.25.

Should this option expire out of the money, the $200 premium I would collect on the $4,500 I must reserve for the 64 days to expiration in case of assignment, translates to an annualized yield of 25.35% on that money.

Should this option be assigned to me, the $200 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $4,300, or $43/share (prior to any commission).

 

Closed Options

I did not have any Closed options this month.

 

Expired Options

Only one option was set to expire this month, and it did.

Option #17 – PUT CMCSA (COMCAST CORP) $31.50 EXP 06/15/18, premium = $55 (after commission)

This option traded in the money for a good while, but rose in the week prior to expiration, and finished well out of the money.  I suspect that the green light of the AT&T acquisition of Time Warner and what that meant for other media companies, led to CMCSA’s rise in stock price the past week.

I would have been comfortable with assignment on this option, but I’m good with realizing the $55 premium as well.

Writing another put option on CMCSA this month is a possibility, but I may wait for a price lower than the current $33.88 it closed at last Friday.

 

Assigned Options

I did not have any Assigned options this month.

 

Options Income

This month I saw a small amount of options income relative to the past couple of months.  Nevertheless, it continues to push my annual total forward.

My year-to-date options income total now stands at $980.90.  My monthly average is still above the $150/mo. pace needed to achieve my 2018 goal of $1,800.

Here’s a breakdown of the 2018 options income by month.

 

 

I do have a couple of Open options to carry into future months, one in July and one in August.  So, there’s the potential for collecting some premiums in the near-term.  In addition, I still have my Celgene (CELG) shares to write call options against, or to sell at a higher price than I paid, as a way to realize even more income as well.  CELG shares seem to be leveling off in the upper $70s for now, but this is well below my purchase price, so selling at a profit may be difficult unless the shares rally from here.

 

Summary

I couldn’t string together a 3rd options income month above $100, but I’ll take any positive amount, as it keeps me on pace to achieve my yearly $1,800 goal.

I did write one option with a longer duration than I normally have, so we’ll see how that pans out in the next couple of months.

I’ll see if I can write some additional options, too, as currently I’ve only got $25 of options premiums pending for July.  I don’t want to fall too far below my $150/mo. target.

 

Do you think I can reach my options income goal for this year?  If you trade options, what recent trades do you have open?  Please let me know in the comments.