To start with the bottom line about our 02/24/2020 results:
We did all right!
Mostly luck, a bit of skill.
Originally, we took a step which left us wondering whether it would be:
The Monday Morning Millionaire Program recommends that members just sell and never buy derivatives (puts and calls). Further, the Program recommends that members sell derivatives in their “fun” portfolio only. Selling derivatives, just selling and never buying, is low risk. However, if the underlying security rises above the strike price of a call, the seller investor will be assigned and forego that rise. That investor incurs an opportunity loss — does not lose money, just makes less than was possible.
In my “fun” portfolio I have been writing (selling) covered calls and cash-secured puts on AbbVie (symbol ABBV). My “fun” portfolio makes up 5% of our holdings.
Last Monday, Rosi and I departed from that and committed 25% of our portfolios to ABBV at about $US95 per share. We then sold covered calls on it, just out of the money, expiration date on Friday of the same week.
Why did we do that? I have not seen option premiums that high before. The bid/ask price on the February 28 expiry date, strike price $US95 (ABBV C 28FEB20 95.00 US) was $1.23/$1.30.
It worked! We got $1.23/$95 x 100 = 1.29% per week x 52 = 67.3% annually!
This week, what we did could well lead to:
Why and how?