Pricing of CC (Covered Calls) versus CSP (Cash-secured puts)

I had an interesting discussion with someone on Reddit regarding a CC versus a CSP. I've always felt the CC was more profitable over a dividend event, because the call holder could exercise it early to prevent me from getting the dividend. However, tracking the NUE position overnight (which made a difficult comparison because it jumped in price overnight in addition to going ex-dividend) showed otherwise. 

From the discussion:

The situation at the close:

NUE	Strike	Call Bid	Extrinsic	Put Bid	Extrinsic	Extr Diff
$56.86	$56.50	$0.69	$0.33	$0.65	$0.65	$0.32
$56.86	$57.00	$0.46	$0.46	$0.92	$0.78	$0.32

But, bottom line -- if the CC and CSP had been written at the close, the outcome as of the ex-dividend date would have been:

• $57 CC: -$56.86 + $0.46 + $0.3775 + $57 = $0.9775 
• $57 CSP: $0.92

• $56.50 CC: -$56.86 + $0.69 + $0.3775 + $56.50 = $0.7075
• $56.50 CSP: $0.65

All in all, the CSP would have been easier, although slightly less profitable. There's also no delay between ex-dividend date and payment date of the dividend. Cleaner transactions all around.

The $0.06 difference between the two is due to that $0.32 variance yesterday. That is, the CSP's only collected $0.32 of the $0.3775 dividend.

But given the $0.32 variance had to be corrected overnight, doesn't that suggest some type of advantage could be exploited? What about a "Dividend Champion" that pays a dividend over $1, such as MMM?

WFC -- Call Rolled Out

Since the price has rallied recently, I was able to write a new call to replace the one that expired two months ago:

Date	Description	Amount	ROI	aROI	Profit
2017-03-20	Buy WFC @ $57.90	-$57.90
2017-03-20	Sell WFC 3/24 2017 $57.50 Call @ $0.75	$0.75
2017-03-28	Sell WFC 5/5 2017 $57.50 Call @ $0.80	$0.80
2017-05-03	Div WFC @ $0.38	$0.38
2017-04-13	Buy WFC 5/5 2017 $57.50 Call @ $0.03	-$0.03
2017-06-29	Sell WFC 7/21 2017 $57.50 Call @ $0.49	$0.49
2017-07-21	If assigned at expiration	$57.50	3.44%	10.20%	$1.99
2017-06-29	Current value	$55.78	0.47%	1.69%	$0.27
2017-06-29	Buy and Hold	$55.78	-3.01%	--	-$1.74

 

NUE -- New Dividend Play

NUE is going ex-dividend on 2017-06-28 for $0.3775.

Date	Description	Amount	ROI	aROI	Profit
2017-06-26	Buy NUE @ $57.15	-$57.15
2017-06-26	Sell NUE 6/30 2017 $57.00 Call @ $0.81	$0.81
2017-06-30	If assigned at expiration	$57.00	1.15%	105.38%	$0.66
2017-06-26	Current value	$57.00	1.15%	421.52%	$0.66
2017-06-26	Buy and Hold	$57.30	0.26%	--	$0.15

 

Possible dividend plays for tomorrow

Stocks in the "Upcoming Dividends" workbook:

Ticker	Options	Estimated Ex-dividend date	Week	Yield	Retrieved Ex-dividend date	Warning
NUE	W	xxxx-06-28	1	2.63%	2017-06-28
T	W	xxxx-07-06	2	5.16%	2017-04-06	<===
NFG	M2	xxxx-06-28	1	2.94%	2017-06-28
APD	M1	xxxx-06-29	1	2.62%	2017-06-29
SYY	M2	xxxx-07-05	2	2.64%	2017-07-05
UVV	M3	xxxx-07-06	2	3.32%	2017-07-06

---

Running those through the "CC-List" workbook for weekly and monthly expirations:

Ticker	Last Price	Strike	RIU	RIE	D/P	aROI	Call Description	Bid Price
NUE	$57.50	ITM	1.5%	1.5%	1.5%	78.0%	NUE 6/30 2017 $57.50 Call	$0.86
T	$37.95	OTM	0.6%	0.7%	0.6%	28.9%	T 6/30 2017 $38.00 Call	$0.21

Ticker	Last Price	Strike	RIU	RIE	D/P	aROI	Call Description	Bid Price
NUE	$57.50	ITM	4.1%	4.1%	4.1%	53.5%	NUE 7/21 2017 $57.50 Call	$2.36
T	$37.95	OTM	1.0%	1.1%	1.0%	13.1%	T 7/21 2017 $38.00 Call	$0.38
UVV	$65.10	ITM	1.7%	1.7%	1.8%	22.0%	UVV 7/21 2017 $65.00 Call	$1.20
SYY	$49.92	OTM	1.5%	1.7%	1.5%	19.6%	SYY 7/21 2017 $50.00 Call	$0.75
APD	$144.94	OTM	1.1%	1.1%	1.1%	14.4%	APD 7/21 2017 $145.00 Call	$1.60
NFG	$56.37	ITM	0.2%	0.2%	2.7%	3.0%	NFG 7/21 2017 $55.00 Call	$1.50

---

Running the top items through the "CC-Roll" workbook:

Action	Ticker Symbol	Pivot	Price	Extrinsic		Ex-Div?	Earn?
Buy or owned	NUE	$0.00	$57.50	--		2017-06-28	2017-07-20
Buy to close	None	--	--	--
Data Source	Barchart
Action	Ticker Symbol	Bid Price	Extrinsic	Profit	aROI	Dividends	Earn Rpt
Sell to open	NUE 6/30 2017 $57.50 Call	$0.86	$0.86	$0.86	78.0%	$0.38	--
Sell to open	NUE 6/30 2017 $58.00 Call	$0.64	$0.64	$0.64	58.0%	$0.38	--
Sell to open	NUE 7/21 2017 $57.50 Call	$2.36	$2.36	$2.36	53.5%	$0.38	XXX
Sell to open	NUE 7/7 2017 $57.50 Call	$1.17	$1.17	$1.17	53.0%	$0.38	--
Sell to open	NUE 6/30 2017 $57.00 Call	$1.08	$0.58	$0.58	52.6%	$0.38	--
Sell to open	NUE 7/21 2017 $58.00 Call	$2.11	$2.11	$2.11	47.8%	$0.38	XXX
Sell to open	NUE 7/21 2017 $57.00 Call	$2.59	$2.09	$2.09	47.4%	$0.38	XXX
Sell to open	NUE 7/14 2017 $57.50 Call	$1.48	$1.48	$1.48	44.7%	$0.38	--
Sell to open	NUE 7/28 2017 $57.50 Call	$2.42	$2.42	$2.42	43.9%	$0.38	XXX
Sell to open	NUE 6/30 2017 $58.50 Call	$0.48	$0.48	$0.48	43.5%	$0.38	--
Action	Ticker Symbol	Pivot	Price	Extrinsic		Ex-Div?	Earn?
Buy or owned	T	$0.00	$37.95	--		2017-07-06	2017-07-25
Buy to close	None	--	--	--
Data Source	Barchart
Action	Ticker Symbol	Bid Price	Extrinsic	Profit	aROI	Dividends	Earn Rpt
Sell to open	T 6/30 2017 $38.00 Call	$0.21	$0.21	$0.21	28.9%	--	--
Sell to open	T 7/7 2017 $38.00 Call	$0.26	$0.26	$0.26	17.9%	$0.49	--
Sell to open	T 7/14 2017 $38.00 Call	$0.30	$0.30	$0.30	13.7%	$0.49	--
Action	Ticker Symbol	Pivot	Price	Extrinsic		Ex-Div?	Earn?
Buy or owned	UVV	$0.00	$65.10	--		2017-07-06	2017-08-03
Buy to close	None	--	--	--
Data Source	Barchart
Action	Ticker Symbol	Bid Price	Extrinsic	Profit	aROI	Dividends	Earn Rpt
Sell to open	UVV 7/21 2017 $65.00 Call	$1.20	$1.10	$1.10	22.0%	$0.54	--
Sell to open	UVV 8/18 2017 $65.00 Call	$2.15	$2.05	$2.05	20.5%	$0.54	XXX

---

 

WMT -- Call rolled out

The existing call was rolled out to next week:

Date	Description	Amount	ROI	aROI	Profit
2017-06-19	Buy WMT @ $75.35	-$75.35
2017-06-19	Sell WMT 6/23 2017 $75.50 Call @ $0.58	$0.58
2017-06-23	Buy WMT 6/23 2017 $75.50 Call @ $0.01	-$0.01
2017-06-23	Sell WMT 6/30 2017 $75.50 Call @ $0.35	$0.35
2017-06-30	If assigned at expiration	$75.50	1.42%	47.12%	$1.07
2017-06-23	Current value	$74.80	0.49%	44.81%	$0.37
2017-06-23	Buy and Hold	$74.80	-0.73%	--	-$0.55

 

WMT -- New RSI(2) Position

I'm hoping the market has overreacted to the AMZN-WFM merger. I'm a big customer of both Amazon and Walmart, but in recent years, I've seen more improvements in WMT than in AMZN. Prices at WMT are now frequently lower than AMZN, while AMZN used to be more competitive. And I can now get groceries (and other items) delivered from WMT. My four delivery orders this year all arrived within an hour. I haven't been impressed with Amazon Now selections, and Amazon Fresh is not available here (Phoenix).

Date	Description	Amount	ROI	aROI	Profit
2017-06-19	Buy WMT @ $75.35	-$75.35
2017-06-19	Sell WMT 6/23 2017 $75.50 Call @ $0.58	$0.58
2017-06-23	If assigned at expiration	$75.50	0.97%	88.40%	$0.73
2017-06-19	Current value	$75.47	0.93%	339.08%	$0.70
2017-06-19	Buy and Hold	$75.47	0.16%	--	$0.12

 

TGT -- Call Rolled Out

The last call expired worthless nearly a month ago, and I put a limit order in to buy a new one almost immediately. However, since the strike was a bit higher than the market price, it sat there. With the recent price surge, it triggered this morning. Briefly. So I'm glad I had the limit order out there.

Date	Description	Amount	ROI	aROI	Profit
2017-05-09	Buy TGT @ $58.22	-$58.22
2017-05-15	Div TGT @ $0.60	$0.60
2017-05-09	Sell TGT 5/19 2017 $57.50 Call @ $1.68	$1.68
2017-06-12	Sell TGT 6/23 2017 $58.00 Call @ $1.00	$1.00
2017-06-23	If assigned at expiration	$58.00	5.26%	42.70%	$3.07
2017-06-12	Current value	$58.00	5.26%	56.52%	$3.07
2017-06-12	Buy and Hold	$58.18	0.96%	--	$0.56

 

IWM -- Closed Dividend Play

The call will be exercised over the weekend.

Date	Description	Amount	ROI	aROI	Profit
2017-03-17	Buy IWM @ $138.28	-$138.28
2017-03-17	Sell IWM 3/24 2017 $138.50 Call @ $0.76	$0.76
2017-03-24	Div IWM @ $0.39	$0.39
2017-03-27	Sell IWM 5/19 2017 $138.00 Call @ $1.80	$1.80
2017-05-19	Buy IWM 5/19 2017 $138.00 Call @ $0.03	-$0.03
2017-05-23	Sell IWM 6/2 2017 $138.00 Call @ $1.00	$1.00
2017-06-02	Asgn IWM @ $138.00	$138.00	2.63%	12.47%	$3.64
2017-06-02	Buy and Hold	$139.85	1.42%	--	$1.96