Established New Covered Call on Dow Inc.

On October 08, 2021, I bought 100 shares with Dow Inc. stock paying $58.5 per share, and simultaneously sold 1 covered call on these shares with a strike price of $59 and expiry next Friday. Credit received $61 (before commissions)

Dow Inc. is an American commodity chemical company. It was spun off DowDuPont on April 1, 2019, at which time it became a public company and was added to the Dow Jones Industrial Average. The company is headquartered in Midland, Michigan.

This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.

This trade comes as the #8 in the month of October, according to my trading plan for this month, the premium generated from this trade makes me about 9.66% of my $600 monthly goal.  While in total I have reached already 18.83% so far. Awesome!

Dow Inc. has been on my radar for some time already, I like this stock because it’s the part form the Dow Jones index, has a relatively high dividend yield and options premiums are quite juicy (at least for now)

Here I made a quick YouTube video

In short, the idea is to hold this stock at least for one year by selling weekly options

here is the trade setup:

  • BOT 100 DOW Stock 58.5USD

  • SLD 1 DOW OCT 15 '21 59 Call Option 0.61 USD

I bought 100 shares at $58.5 apiece, in total paying $5,850, and sold a covered call with next week’s expiry.

It feels I bought this stock at the right moment, as during the trading session price moved quite a bit

$58.5 seems like nice timing, as just shortly the price bounced back, let’s see how the stock is going to perform in the upcoming weeks/months.

What happens next?

On the expiry date, October 15, 2021, DOW is trading under $59 per share -  options expire worthlessly and I keep premium - if DOW trades above $59 on the expiry date, my 100 shares will get called away and I realize my max profit $111 ($50+$61) or potential 1.89% yield in 7 days.

Break-even price: $58.5-0.61= $57.89

It is interesting to note that stock analysts are giving the following forecast for DOW stock:

The 21 analysts offering 12-month price forecasts for Dow Inc have a median target of 69.00, with a high estimate of 85.00 and a low estimate of 54.00. The median estimate represents a +17.21% increase from the last price of 58.87.

When looking at technicals RSI or Relative strength index we are in the neutral territory now:

It will be interesting to see how this challenge will end in a year.