Thursday, February 16, 2017

Option trade

    With the markets on both sides of the border (US and Canada) marching higher, it is difficult to find stocks trading for cheap. I am bulling on Telus Communications at the moment. Looking at a 6 month chart of Telus Communications (T.TO).

Click to Enlarge

      On February 15,  I sold a put option in T.TO with a March 17 2017 expiration day.  I collected a premium of $29.05 after commissions.  The strike price is $42.00 per share.


Strike Price: $42.00
Total Premium Received : $29.05
Days to Expiration: 30
Current Annual Dividend = $1.92
 Option Assignment Fee = $24.95

Scenario #1 :  Option not assigned

Total Return = $29.05 / (1*100*$42.00)
                     = .00692
                     = 0.692%

The total return for 30 days is 0.692%.  The annualized return is 8.42%.  My high interest savings accounts pays an annual interest of 0.80%.

Scenario #2:  Option is Assigned 

Adjusted Cost Base  per share= [1*100*$42- $29.05 +$24.95] / 100
                                                = $41.96

Yield on Cost = $1.92./$41.96*100 %
                       = 4.575%

 What would the yield be if shares purchased directly at $65.50 using a limit order?

Commission = $4.95

ACB/per share = [1*100*$42.00+$4.95 ] / 100
                         = $42.04

Yield on Cost = ($1.92/ $42.04) * 100%
                       = 4.567%

Disclosure:  I do not own any shares of T.TO in any accounts as of this writing.

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.


  1. The option assignment fee is rather large. Have you considered a brokerage with more favorable option commissions? I recently switch from Scottrade to Interactive Brokers (IB) for this reason. Scottrade charged $7 per trade, plus $0.75 per options, and $17 to execute an assignment. Just a thought.

    1. FerdiS DivGro,

      Thanks for dropping by. My brokerage is Questrade. It is $4.95 per trade minimum to $9.95 per trade maximum, with $0.01 per share. So 200 shares is $4.95 and 600 shares is $6.00. Options are $9.95 plus $1.00 per contract. Their option assignment fee used to be $12.95 then they raised it to $24.95 a few years ago.

      Questrade does have another platform for trades where everything is cheaper, but you pay monthly fees for this.

      I have thought about switching for IB for their cheap commissions. Right now I am not working. My actual trading account and margin account is all in one right now. My trading account balance is around $3600.

      Switching to a different brokerage is highly likely in the next couple of years.