Discover more from Covered Calls with Reinis Fischer
Sold Put Option on WFC – 1.25% potential income return in 36 days
On April 5th, 2023, I sold an additional 1 put option on Wells Fargo stock with a strike price of $31 and expiry on April 28, 2023).
For this trade setup, I was rewarded with $18 (after commissions), which would yield about a 1.25% return in 36 days if the put option will expire worthless.
Originally I started this position on March 23, 2023, and I'm looking to wheel it at least for one year. During the road, I'm ready to take assignments and turn this position into a covered call + collect the dividend.
Also, this trade comes as the #3 in the month of April, according to my trading plan for this month, the premium generated from this trade makes up about 9% of my $200 monthly goal. While in total I have reached already 48.33% this month so far. Awesome.
When setting up this trade I was looking for a high probability winning trade and chose my strike price with Delta -0.0825, meaning about a 92% chance of expiring worthless.
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 APR 28 '23 31 Put Option 0.20 USD
For this trade, I got a premium of 18.49 USD (after commissions) or about 1.25% potential income return in 36 days, if options expire worthlessly
What happens next?
On the expiry date, April 28, 2023, WFC is trading above $31 per share - options expire worthlessly and I keep premium - if WFC trades under $31 on the expiry date, I risk getting assigned 100 shares, and will have to buy them paying $3,100
But as I already have collected a premium of $0.20+0.18 per share, my break-even price for this trade is $31-$0.20-$0.18 = $30.62
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: 2 trades since March 23, 2023
Options premium: $39