Discover more from Covered Calls with Reinis Fischer
Sold Put Option on WFC – 0.61% potential income return in 8 days
On March 23rd, 2023, I sold 1 put option on Wells Fargo stock with a strike price of $33 and expiry on March 31, 2023). For this trade setup, I was rewarded with $20.15 (after commissions), which would yield about 0.61% return in 8 days if the put option will expire worthless.
I decided to take additional risk and yield additional options premium from the beaten down US bank stocks after closing early, and freeing up margin capital, Amazon 84 Put option
When setting up this trade I was looking for a high probability winning trade and chose my strike price with Delta -0.13
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.
Here is the trade setup:
SLD 1 WFC MAR 31 '23 33 Put Option 0.21 USD
For this trade, I got a premium of 20.15 USD (after commissions) or about 0.61% potential income return in 8 days, if options expire worthlessly
What happens next?
On the expiry date, March 31, 2023, WFC is trading above $33 per share - options expire worthlessly and I keep premium - if WFC trades under $33 on the expiry date, I risk getting assigned 100 shares, and will have to buy them paying $3,300
But as I already have collected a premium of $0.20 per share, my break-even price for this trade is $33-$0.20 = $32.80
In case of an assignment, I will turn this trade into a wheel strategy and will start selling covered calls.
Anyhow, if troubled with the strike price near the expiry, I will try to roll it forward and down, preferably for credit, before actually taking the stock assignment.
In total: 1 trade since March 23, 2023
Options premium: $20