For several weeks now, Novavax (NVAX) dropped by more than the premium income our fearless, intrepid investor received for an overall loss in her “fun” portfolio. On Friday, June 3, NVAX rose above her strike price and she was assigned.
To stay in the covered call game, on Monday, June 6, she bought the 2,500 shares of NVAX at $47.14 per share for a total of $117,850.00. Things went along nicely, she wrote covered calls far enough out-of-the-money to avoid being assigned.
On June 20, she sold 10 covered call contracts on Novavax (NVAX) at a strike price of $48, expiry date July 1. (C 01JUL22 48.00).
Later that day, she also sold 15 covered call contracts on Novavax (NVAX) at a strike price of $US52, expiry date expiry date July 1. (C 01JUL22 52).
These two positions gave her $12,550 immediate premium income regardless of what the NVAX shares did.
NVAX shares rose above her strike price and she was assigned. On the 10 contracts she earned $860.00. ($48.00 minus $47.14 times 1,000)
On the 15 contracts she earned $7,290. ($52.00 minus $47.14 times 1,500)
Her total earnings from writing the 25 covered calls on NVAX came to $20,700.00. ($12,550 immediate premium income plus $860.00 plus $7,290.00)
Over the last few weeks, her “fun” portfolio has grown mainly because of luck and not skill.
What are her plans for the $20,700.00 today when the market opens at 9:30 AM? (Monday, July 4, is a market holiday.)
What is the worst that can happen?
What is the best that can happen?
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