Trading Options Secured Put and Covered Call Cont’d
In my previous blog post, Trading Options Secured Put and Covered Call, we were using an active options trade for Nutanix (Ticker Symbol: NTNX) with an open question of how it would close at its expiration on the 17th of February (third Friday of the month). Well the answer to that question has come and NTNX closed at $31.47 and on Saturday the stock was called away from me at my $30 strike. Again, I did not capture that $1.47 appreciation as my gain was capped at my premium of $95, because like I said, I wanted my money back.
I got $2,994.97 back on the 18th minus commission $4.95 and $0.08 fee, so to recap what happened is – first I leveraged my cash, was assigned the stock, then I leveraged the stock, and it was called away, and I got back my original cash investment (minus commissions and fee) and I can start the process over again on the same stock or another if I like. My initial investment was $3,000, and I received $351 + $89 = $440 in premiums over a 63 day period for return on investment (ROI (net profit/cost of investment) x 100) before taxes of 14%.
Now let us examine our options if we wanted to get back in on Nutanix on the puts side. If I wanted to sell Mar17 30 put, I would receive $2.10 in premium when viewing the bid column. When selling call/put options, always view the bid side for the premiums you can potentially collect on the stock at the different strike prices like below and whatever that number is by moving the decimal two positions to the right gives you whole dollar amount you would get for 1 option contract of 100 shares.
However, I might stay away from Nutanix this month because they report earnings at the beginning of March prior to the option expiration and one thing I have learned is stuff can get kind of crazy around earnings, so best to examine others stocks in this $30 price range with an earnings already reported or happening post my options expiration.
This concludes this example of the options we have to place a new secured put after the return of our original capital investment due to stock being called away on our covered call.
