Monday, November 28, 2022. How our fearless, intrepid investor made out last week and her plans for today

Writing (selling) just out-of-the-money covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week, our fearless, intrepid investor lost $US10,990.00 in her “fun” portfolio over one year.

The risk in selling covered calls entirely comes from the market movement of the underlying security. When she owned NVAX, it dropped to a greater, far greater, extent than the premium income derived from selling covered calls on the security.

She ignored habit number three, which is to buy the American economy as a whole by using an exchange-traded fund which tracks the S&P 500. That means no picking individual stocks.

Additionally,  she learned to write (sell) covered calls sufficiently out-of-the-money to earn about 1% per month or slightly more. That would significantly reduce the possibility of being assigned!

Last Monday, November 21, our fearless, intrepid investor  wrote (sold) covered calls on SPY, strike price $6.00 out of the money, expiry date Friday of the same week, that is, November 25. (C 25NOV22 400.00)

She made $US0.75 per share in premium income. Then what happened?

When SPY rose just to below $US400.00, she brought back the covered calls which she sold (C 25NOV22 400.00), meaning that she was out of her obligation to sell her SPY shares below market price to the buyer of her covered calls. The cost of buying the back was lower than the premium income she received when she sold.

She was now in a position to sell more covered calls on SPY and the new, higher price level.
On 11/25/22, she sold SPY covered calls @ $409.00 and got a decent premium income.

At the money was $403.00, allowing $US6 per share for growth.

What will did she do when the NYSE opened at 9:30 AM today?

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me