The Monday Morning program does not recommend that members get involved with options unless they’re comfortable with the idea. Members can do very well only practising the six habits which we promote.
Invest to the sleeping point.
Rosi and I are comfortable with options. When the market opens at 9:30 AM today, we plan to sell covered calls on SPDR S&P 500 ETF Trust (SPY) and on Novavax (NVAX), expiry date this coming Friday, April 16, 2021. Thales’s success story notwithstanding, our members should only sell and never buy options.
Our core portfolios hold only 50% SPY and 50% money market (TDB166). Our “fun” portfolio holds NVAX, among other securities.
At the closing bell last Friday, the market price of SPY was greater than our strike price and our shares were called away. Over the weekend, we placed orders to buy back an equal number of shares for which we will need to pay a higher price. Buying at a higher price is inconsistent with the fifth habit or Monday Morning members, to buy low and sell high. Cases like this one are an exception. We are putting more rather than less money into securities with a high expected return, as we all should.
We will write covered calls on our SPY holdings at $414, which will allow us to benefit from $2.00 per share growth if there is any, expiry date this coming Friday, April 16 (SPY C 16APR21 414.00) SPY has three expiry dates each week. Getting involved with the Monday and Wednesday expiry dates is of no significant benefit over selecting the Friday of the same week.
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