| Stock Price | Date | Description | Total | xIRR |
|---|---|---|---|---|
| $79.72 | 2012-01-27 | 2000 shares IWM assigned @ $78.00 | $155,975.00 | 25.1% |
Sunday, January 29, 2012
IWM -- Position Closed
Because both the short-term and long-term RSI was high (2d and 14d), I decided to let this position get assigned instead of rolling the call forward:
MMM -- Position Closed
Because both the short-term and long-term RSI was high (2d and 14d), I decided to let this position get assigned instead of rolling the call forward:
| Stock Price | Date | Description | Total | xIRR |
|---|---|---|---|---|
| $87.46 | 2012-01-27 | 2000 shares MMM assigned @ $85.00 | $174,875.00 | 19.9% |
Friday, January 20, 2012
IWM -- Adjustment
The IWM position was adjusted to the shorter-term call:
I went from a call with $2.34 of extrinsic value to one with $0.91 of extrinsic value, but I fully expect to earn more than the $1.43 difference in the additional seven weeks I now have the ability to write weekly calls on.
| Stock Price | Date | Description | OptPrice | Total | xIRR |
|---|---|---|---|---|---|
| $78.08 | 2012-01-20 | Buy 20 IWM 3/17 2012 $76.00 Call @ $4.42 | $4.42 | -$8,869.95 | 24.5% |
| $78.01 | 2012-01-20 | Sell 20 IWM 1/27 2012 $78.00 Call @ $0.92 | $0.92 | $1,810.05 | 25.1% |
I went from a call with $2.34 of extrinsic value to one with $0.91 of extrinsic value, but I fully expect to earn more than the $1.43 difference in the additional seven weeks I now have the ability to write weekly calls on.
Thursday, January 19, 2012
IWM -- Comment
I'm considering buying back the IWM 3/17 2012 $76.00 Call tomorrow, 2 months early.
I sold it for $3.49, when IWM was $75.95, so all of that was extrinsic value.
Now that IWM is trading at $78.20, the call is selling for $4.44, which means it only has an extrinsic value for $2.24.
So, as I see it:
With 8 weeks until the option expires, I think I can earn a lot more time decay selling weeklies than the $2.24 of extrinsic value that remains on the option. For example, next week's $78 call currently has $0.86 of extrinsic value. It also means I earned about $0.18 per day of time decay already, with under $0.04 per day of time decay remaining.
But it also has me wondering -- why such a huge change in extrinsic value over a single week on an option that was 9 weeks away from expiring? Is this a regularly occurring phenomenon that can be taken advantage of? How does one recognize or predict when such a shift might happen?
I sold it for $3.49, when IWM was $75.95, so all of that was extrinsic value.
Now that IWM is trading at $78.20, the call is selling for $4.44, which means it only has an extrinsic value for $2.24.
So, as I see it:
| $0.05 | = Captial gain (i.e. stock moving from $75.95 to $76 strike price) |
| $1.25 | = Change in extrinsic price (i.e. earned time decay) |
| $0.95 | = Actual change in call price |
| ------- | -------------------------------------------------------------------- |
| $2.25 | = Actual change in stock price |
With 8 weeks until the option expires, I think I can earn a lot more time decay selling weeklies than the $2.24 of extrinsic value that remains on the option. For example, next week's $78 call currently has $0.86 of extrinsic value. It also means I earned about $0.18 per day of time decay already, with under $0.04 per day of time decay remaining.
But it also has me wondering -- why such a huge change in extrinsic value over a single week on an option that was 9 weeks away from expiring? Is this a regularly occurring phenomenon that can be taken advantage of? How does one recognize or predict when such a shift might happen?
MMM -- Comment
Just a heads up -- last year, MMM went ex-dividend on 2/16, for a $0.55 dividend. If they have the same ex-dividend date this year, that will occur just before the February monthly option expiration.
MMM -- New Call
That worked out well. By the time I logged on this morning, MMM was already up about $0.75 from when I bought back my call yesterday:
When the call sold, it was the high for the day so far. Extrinsic value on this call was $1.14 for the week, or $0.14 per day. Much better than in the past. Maybe people are getting too optimistic about the near future? I also looked at the $87.50 for next week, which was paying $0.09 per day, and the Feb $85 call, which was paying $0.05 per day.
| Stock Price | Date | Description | OptPrice | Total | xIRR |
|---|---|---|---|---|---|
| $85.85 | 2012-01-19 | Sell 20 MMM 1/27 2012 $85.00 Call @ $1.99 | $1.99 | $3,950.05 | 16.7% |
When the call sold, it was the high for the day so far. Extrinsic value on this call was $1.14 for the week, or $0.14 per day. Much better than in the past. Maybe people are getting too optimistic about the near future? I also looked at the $87.50 for next week, which was paying $0.09 per day, and the Feb $85 call, which was paying $0.05 per day.
Wednesday, January 18, 2012
MMM -- Close Out Call
I bought back the outstanding call, with the intention of selling the next weekly or monthly call either tomorrow or on Friday:
When I've posted transactions like this before, a common question is why I was willing to accept a loss on the call. I don't see it that way. In the above call transaction, I sold the call for $1.45 of extrinsic value and bought it back when it had $0.03 of extrinsic value. So I've actually collected $1.42 of time decay on the call.
Although the "Total" column looks like a loss, note that I used to have 2000 shares of an $81.91 stock, but now own 2000 shares of an $84.99 stock. The change in intrinsic value on the call was offset by the increase in price on the stock.
Basically, the stock went up $3.08 in price, while the call went up only $1.07 in price. Since I already said I was willing to sell my shares for $83.95 when I sold the original call. any rise above that price is opportunity lost whether I buy back the call or not. In this case, $1.04 (i.e. $84.99 - $83.95). And note that the this $1.04 is the $0.03 extrinsic value I am paying to buy back the call, plus the difference between the stock and call appreciation (i.e. $3.08 - $1.07 = $1.01).
If I had wanted to close out the position, I would have simply let it get exercised at expiration date. So the call buyback is the cost I am willing to spend to be able to continue selling calls on the 2000 shares NOW, versus waiting until Monday to buy 2000 more shares and then sell calls on them. I consider the $0.03 per share to be worth the expense, especially since it should allow me to get more time decay on the next call I'll sell -- presumably earning me more than that $0.03.
| Stock Price | Date | Description | Total | xIRR |
|---|---|---|---|---|
| $81.91 | 2011-12-23 | Sell 20 MMM 1/21 2012 $82.50 Call @ $1.45 | $2,870.05 | 13.3% |
| $84.99 | 2012-01-18 | Buy 20 MMM 1/21 2012 $82.50 Call @ $2.52 | -$5,069.95 | 14.4% |
When I've posted transactions like this before, a common question is why I was willing to accept a loss on the call. I don't see it that way. In the above call transaction, I sold the call for $1.45 of extrinsic value and bought it back when it had $0.03 of extrinsic value. So I've actually collected $1.42 of time decay on the call.
Although the "Total" column looks like a loss, note that I used to have 2000 shares of an $81.91 stock, but now own 2000 shares of an $84.99 stock. The change in intrinsic value on the call was offset by the increase in price on the stock.
Basically, the stock went up $3.08 in price, while the call went up only $1.07 in price. Since I already said I was willing to sell my shares for $83.95 when I sold the original call. any rise above that price is opportunity lost whether I buy back the call or not. In this case, $1.04 (i.e. $84.99 - $83.95). And note that the this $1.04 is the $0.03 extrinsic value I am paying to buy back the call, plus the difference between the stock and call appreciation (i.e. $3.08 - $1.07 = $1.01).
If I had wanted to close out the position, I would have simply let it get exercised at expiration date. So the call buyback is the cost I am willing to spend to be able to continue selling calls on the 2000 shares NOW, versus waiting until Monday to buy 2000 more shares and then sell calls on them. I consider the $0.03 per share to be worth the expense, especially since it should allow me to get more time decay on the next call I'll sell -- presumably earning me more than that $0.03.
Sunday, January 15, 2012
MMM -- Catchup
This is a catchup post, to document all MMM trades since restarted doing covered calls after the option symbology change:
| Stock Price | Date | Description | Total | xIRR |
|---|---|---|---|---|
| $81.22 | 2010-07-19 | Own 1000 shares MMM @ $81.22 | -$81,220.00 | -- |
| $85.10 | 2010-07-23 | Sell 10 MMM 8/21 2010 $85 Call @ $2.00 | $1,980.05 | 78.4% |
| $81.71 | 2010-08-19 | Buy 10 MMM 8/21 2010 $85 Call @ $0.05 | -$69.95 | 32.7% |
| $0.53 | 2010-09-13 | Dividend of $0.525 per share | $525.00 | -- |
| $84.88 | 2010-09-14 | Sell 10 MMM 10/16 2010 $85 Call @ $2.00 | $1,980.05 | 38.1% |
| $88.90 | 2010-10-14 | Buy 10 MMM 10/16 2010 $85 Call @ $3.90 | -$3,919.95 | 41.5% |
| $88.90 | 2010-10-14 | Sell 10 MMM 11/20 2010 $90 Call @ $1.85 | $1,830.05 | 35.9% |
| $86.50 | 2010-11-11 | Buy 10 MMM 11/20 2010 $90 Call @ $0.05 | -$69.95 | 27.3% |
| $0.53 | 2010-12-16 | Dividend of $0.525 per share | $525.00 | -- |
| $85.53 | 2010-12-14 | Sell 10 MMM 01/22 2011 $85 Call @ $2.52 | $2,500.05 | 20.5% |
| $90.00 | 2011-04-16 | 1000 shares MMM assigned @ $90.00 | $89,975.00 | -- |
| $91.40 | 2011-04-18 | Buy 2000 shares MMM @ $91.40 | -$182,800.00 | -- |
| $91.46 | 2011-04-18 | Sell 20 MMM 5/21 2011 $92.50 Call @ $1.52 | $3,010.05 | -- |
| $93.94 | 2011-05-18 | 2000 shares MMM assigned @ $92.50 | $187,855.00 | 10.0% |
| $88.01 | 2011-07-30 | Buy 2000 shares MMM @ $88.01 | -$176,020.00 | 4.5% |
| $0.55 | 2011-09-12 | Dividend of $0.55 per share | $1,100.00 | -- |
| $82.30 | 2011-11-11 | Sell 20 MMM 11/19 2011 $82.50 Call @ $1.04 | $2,050.05 | 2.2% |
| $80.66 | 2011-11-18 | Buy 20 MMM 11/19 2011 $82.50 Call @ $0.05 | -$129.95 | 1.8% |
| $80.55 | 2011-11-30 | Sell 20 MMM 12/17 2011 $80.00 Call @ $2.27 | $4,510.05 | 10.7% |
| $0.55 | 2011-12-12 | Dividend of $0.55 per share | $1,100.00 | -- |
| $78.74 | 2011-12-16 | Buy 20 MMM 12/17 2011 $80.00 Call @ $0.05 | -$129.95 | 9.2% |
| $80.17 | 2011-12-20 | Sell 20 MMM 12/23 2011 $80.00 Call @ $0.85 | $1,670.05 | 12.6% |
| $81.87 | 2011-12-23 | Buy 20 MMM 12/23 2011 $80.00 Call @ $1.90 | -$3,829.95 | 9.6% |
| $81.91 | 2011-12-23 | Sell 20 MMM 1/21 2012 $82.50 Call @ $1.45 | $2,870.05 | 13.3% |
Saturday, January 14, 2012
IWM -- Catchup
This is a catchup post, to document all IWM trades since I started using the weekly options for covered calls:
| Stock Price | Date | Description | Total | xIRR |
|---|---|---|---|---|
| $62.03 | 2010-07-12 | Buy 2000 shares IWM @ $62.03 | -$124,056.00 | -- |
| $61.96 | 2010-07-12 | Sell 20 IWM 7/17 2010 $63 Call @ $0.61 | $1,190.05 | 74.9% |
| $61.95 | 2010-07-16 | Buy 20 IWM 7/17 2010 $63 Call @ $0.05 | -$129.95 | 66.5% |
| $62.00 | 2010-07-16 | Sell 20 IWM 7/23 2010 $63 Call @ $0.60 | $1,170.05 | 58.2% |
| $64.04 | 2010-07-23 | Buy 20 IWM 7/23 2010 $63 Call @ $1.13 | -$2,289.95 | 68.2% |
| $64.04 | 2010-07-23 | Sell 20 IWM 7/30 2010 $63 Call @ $1.75 | $3,470.05 | 87.5% |
| $65.35 | 2010-07-29 | Buy 20 IWM 7/30 2010 $63 Call @ $2.48 | -$4,989.95 | 84.2% |
| $65.24 | 2010-07-29 | Sell 20 IWM 8/6 2010 $66 Call @ $0.75 | $1,470.05 | 79.3% |
| $64.02 | 2010-08-06 | Buy 20 IWM 8/6 2010 $66 Call @ $0.01 | -$49.95 | 45.0% |
| $64.31 | 2010-08-06 | Sell 20 IWM 8/13 2010 $65 Call @ $0.70 | $1,370.05 | 53.1% |
| $62.38 | 2010-08-11 | Buy 20 IWM 8/13 2010 $65 Call @ $0.06 | -$149.95 | 17.3% |
| $62.42 | 2010-08-11 | Sell 20 IWM 8/13 2010 $63 Call @ $0.43 | $830.05 | 24.6% |
| $61.24 | 2010-08-13 | Buy 20 IWM 8/13 2010 $63 Call @ $0.05 | -$129.95 | 1.7% |
| $61.22 | 2010-08-13 | Sell 20 IWM 8/21 2010 $62 Call @ $0.70 | $1,370.05 | 11.1% |
| $60.57 | 2010-08-20 | Buy 20 IWM 8/21 2010 $62 Call @ $0.03 | -$89.95 | 0.9% |
| $60.56 | 2010-08-20 | Sell 20 IWM 8/27 2010 $61 Call @ $0.87 | $1,710.05 | 11.6% |
| $60.57 | 2010-08-27 | Buy 20 IWM 8/27 2010 $61 Call @ $0.05 | -$129.95 | 10.9% |
| $60.57 | 2010-08-27 | Sell 20 IWM 9/3 2010 $62 Call @ $0.62 | $1,210.05 | 16.2% |
| $64.33 | 2010-09-03 | 2000 shares IWM assigned @ $62.00 | $123,975.00 | 31.9% |
| $78.69 | 2010-12-31 | Buy 2000 shares IWM @ $78.69 | -$157,380.00 | -- |
| $78.65 | 2010-12-31 | Sell 20 IWM 1/7 2011 $79 Call @ $0.60 | $1,170.05 | -- |
| $78.40 | 2011-01-07 | Buy 20 IWM 1/7 2011 $79 Call @ $0.04 | -$109.95 | -- |
| $78.11 | 2011-01-07 | Sell 20 IWM 1/14 2011 $79 Call @ $0.50 | $970.05 | -- |
| $80.54 | 2011-01-14 | 2000 shares IWM assigned @ $79.00 | $158,000.00 | -- |
| $80.40 | 2011-01-18 | Buy 3000 shares IWM @ $80.40 | -$241,200.00 | -- |
| $80.60 | 2011-01-18 | Sell 30 IWM 1/22 2011 $81 Call @ $0.40 | $1,160.05 | -- |
| $78.53 | 2011-01-19 | Buy 30 IWM 1/22 2011 $81 Call @ $0.04 | -$159.95 | -- |
| $77.76 | 2011-01-24 | Sell 30 IWM 1/28 2011 $78 Call @ $0.60 | $1,760.05 | -- |
| $80.66 | 2011-02-07 | Sell 30 IWM 2/11 2011 $81 Call @ $0.80 | $2,360.05 | -- |
| $82.07 | 2011-02-11 | 3000 shares IWM assigned @ $81.00 | $242,975.00 | -- |
| $82.10 | 2011-02-15 | Buy 2000 shares IWM @ $82.10 | -$164,200.00 | -- |
| $82.25 | 2011-02-16 | Sell 20 IWM 2/19 2011 $82 Call @ $1.00 | $1,970.05 | -- |
| $83.35 | 2011-02-18 | 2000 shares IWM assigned @ $82.00 | $163,975.00 | -- |
| $81.60 | 2011-02-22 | Buy 3000 shares IWM @ $81.60 | -$244,800.00 | -- |
| $81.80 | 2011-02-22 | Sell 30 IWM 2/25 2011 $82 Call @ $0.70 | $2,060.05 | -- |
| $79.80 | 2011-02-24 | Buy 30 IWM 2/25 2011 $82 Call @ $0.03 | -$129.95 | -- |
| $81.50 | 2011-02-25 | Sell 30 IWM 3/4 2011 $81 Call @ $1.20 | $3,560.05 | -- |
| $82.44 | 2011-03-04 | 3000 shares IWM assigned @ $81.00 | $242,975.00 | -- |
| $82.38 | 2011-03-07 | Buy 3000 shares IWM @ $82.38 | -$247,140.00 | -- |
| $82.10 | 2011-03-25 | Sell 30 IWM 3/25 2011 $82 Call @ $0.75 | $2,210.05 | -- |
| $82.22 | 2011-03-25 | 3000 shares IWM assigned @ $82.00 | $245,975.00 | -- |
| $82.63 | 2011-03-29 | Buy 2000 shares IWM @ $82.63 | -$165,260.00 | -- |
| $82.90 | 2011-03-30 | Sell 20 IWM 4/1 2011 $83 Call @ $0.66 | $1,290.05 | -- |
| -- | 2011-03-30 | Dividend of $0.169 per share | $507.00 | -- |
| $84.54 | 2011-04-01 | 2000 shares IWM assigned @ $83.00 | $165,975.00 | 47.7% |
| $84.95 | 2011-04-08 | Buy 2000 shares IWM @ $84.95 | -$169,900.00 | 47.7% |
| $85.35 | 2011-04-26 | Sell 20 IWM 4/29 2011 $85 Call @ $0.85 | $1,670.05 | 44.0% |
| $86.39 | 2011-05-02 | 2000 shares IWM assigned @ $85.00 | $169,975.00 | 43.3% |
| $80.41 | 2011-07-27 | Buy 2000 shares IWM @ $80.41 | -$160,820.00 | 40.2% |
| $74.22 | 2011-11-11 | Sell 20 IWM 11/19 2011 $75.00 Call @ $1.05 | $2,070.05 | 15.3% |
| $71.86 | 2011-11-17 | Buy 20 IWM 11/19 2011 $75.00 Call @ $0.05 | -$129.95 | 10.7% |
| $71.90 | 2011-11-17 | Sell 20 IWM 11/25 2011 $73.00 Call @ $1.25 | $2,470.05 | 12.6% |
| $67.00 | 2011-11-29 | Buy 20 IWM 11/25 2011 $73.00 Call @ $0.02 | -$69.95 | 9.0% |
| $72.46 | 2011-11-30 | Sell 20 IWM 12/17 2011 $73.00 Call @ $1.91 | $3,790.05 | 16.2% |
| $72.14 | 2011-12-16 | Buy 20 IWM 12/17 2011 $73.00 Call @ $0.03 | -$89.95 | 15.5% |
| $73.49 | 2011-12-20 | Sell 20 IWM 12/23 2011 $74.00 Call @ $0.55 | $1,070.05 | 18.5% |
| $74.54 | 2011-12-23 | Buy 20 IWM 12/23 2011 $74.00 Call @ $0.58 | -$1,189.95 | 18.3% |
| $74.44 | 2011-12-23 | Sell 20 IWM 12/30 2011 $75.00 Call @ $0.70 | $1,370.05 | 19.9% |
| -- | 2011-12-29 | Dividend of $0.36 per share | $719.09 | -- |
| $74.24 | 2011-12-30 | Buy 20 IWM 12/30 2011 $75.00 Call @ $0.03 | -$89.95 | 19.4% |
| $75.67 | 2012-01-03 | Sell 20 IWM 1/6 2012 $75.00 Call @ $1.20 | $2,366.05 | 22.7% |
| $74.80 | 2012-01-06 | Buy 20 IWM 1/6 2012 $75.00 Call @ $0.03 | -$89.95 | 22.3% |
| $76.20 | 2012-01-10 | Sell 20 IWM 1/13 2012 $75.00 Call @ $1.52 | $3,010.05 | 24.5% |
| $76.83 | 2012-01-12 | Buy 20 IWM 1/13 2012 $75.00 Call @ $1.88 | -$3,789.95 | 21.5% |
| $75.95 | 2012-01-13 | Sell 20 IWM 3/17 2012 $76.00 Call @ $3.49 | $6,950.05 | 24.1% |
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