Option Trade - Covered Call

     Recently, I wrote about selling cover calls for 9 contracts on IAMGOLD (IMG.TO) with an 8 day expiration cycle.  These 9 contracts expired worthless on December 16, which you can read about here.

     So, I was looking for an opportunity to sell more covered calls as this stock does not pay a dividend. Today, I noticed the price of gold was way up which provided an opportunity.  I sold 9 contracts at $0.48 per contract and expiration day of January 20 2017. I collected a premium of $413.05 after commissions.

Summary 

Days to expiration:   22 days
Strike Price:   $5
Premium Collected :  $413.05
Initial Cost : $4691.80
Option Assignment Fee : $24.95

Scenario #1:  Option is not assigned

Return = Premium Collected /  Sell Price
           = $413.05 / $4500
            = 9.18%

This return of 9.18% represents a return for only 22 days. Currently the interest on my high interest savings account is 0.80% per year.

Annualized Return= $413.05/$4500 * ( 365 / 22)
                           = 152.2%

Scenario #2 :  Option is Assigned


Scenario #2:  Option is assigned

Return=   Profit/ Initial cost
           = { (9*100*$5.00 + $413.05 - $24.95) - $4691.80} / $4691.80
           = 1.108%

If the option is assigned, the return is still positive.

Long IMG.TO

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.