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Is Ford stock (NYSE:F) good for covered calls?
Short answer - yes. Longer - it depends!
It seems I will get assigned 200 shares of F stock paying $12.5 per share, on April 23, 2021
As of writing this article, F is trading at $11.45. Ouch. Luckily I entered this trade as a bull put credit spread and took a premium of $0.23 per share when constructed this trade on April 8.
here is my trade setup:
SLD 2 F APR 23 '21 12.5 Call Option 0.37 USD
BOT 2 F APR 23 '21 11.5 Call Option 0.09 USD
as my upper strike price is touched, there are two options I could do now:
take an assignment and start selling covered calls
roll forward (and down)
When constructing these credit spreads I’m always trying to stick with point 1 (take an assignment and sell covered calls)
But as Ford has dropped significantly I want to check is it wise investing $2,500 now in this stock.
Ford Stock Price Forecast
The 17 analysts offering 12-month price forecasts for Ford Motor Co have a median target of 13.00, with a high estimate of 16.00 and a low estimate of 9.00. The median estimate represents a +13.54% increase from the last price of 11.45.
This forecast looks quite optimistic to me, and before taking a decision to accept or not I’ve to check options chain data, what can I get from selling F covered calls now, when my buy price is $12.5. Let’s take off these 23 cents and we have a $12.27 break-even.
There are some 10 cents for weekly options (strike 12.5)
14 cents bi-weekly
and 21 cents for monthly options
These numbers are not bad, but I don’t feel comfortable now owning a ford at $12.27 and without a bright future.
Here is what I will do - I will still take an assignment, but just for one contract. The second I will roll forward. And depending on the situation - roll down!
Answering the question asked in the title: Is Ford stock (NYSE:F) good for covered calls?
it depends on what is your average buy price. $11.45? yes, you could get some juicy 38 cents for weekly contracts.. $12? yeah, why not?
Also, it depends - are you happy holding Ford for a long term (say at least a year).
What are your thoughts on F stock? are we going to touch $13 this year?