Tuesday, March 28, 2017

Option Trades : Trade #2

      Earlier in the day, I placed second limit order to try to collect some option premium(s).  You can read about the first trade form this morning, by clicking here.  I

      I have owned 200 shares of Rogers Communications Class B stock for quite some time.  I decided to write covered calls at a $60 strike price and April 21, 2017 expiration date.  The number of days to expiration is 25.  The limit order was set for $0.30 per contract.  I collected a premium of $48.05 including commissions.
Click to Enlarge

        This is a one year chart of RCI.B.  Rogers has traded below $60 over the past year. Investors have been retreating from this stock at times. The stock has paid a quarterly dividend, but Rogers Communications has not raised its dividend for about 2 years and kept their dividend the same.  A major reason for this was due to Rogers and its competitor Shaw coming together in a partnership with Shomi.  Shomi was created to lure their customers to sign up with Shomi, instead of the titan Netflix.  Shomi ended up not being successful  and the 2 companies shut it down Nov 30, 2016.  Both Shaw and Rogers took a huge write down as a result of shutting down Shomi.

      I decided to write covered calls on my position to collect some premium.  I am slightly bearish on RCI.B at the moment.


Scenario #1:  Option Not Assigned

Premiums after commissions: $48.05
Strike Price = $60.00
Days to Expiration = 25
# of contracts = 2

  Scenario #1 :  Option Not Assigned.

Total Return= $48.05/(2*100*$60.00)
                    = 0.40%

This return of 0.40% is for 25 days.

Annualized Return  =[48.05 / (2*100*$60) ] * (365/25)
                                = 5.85%

Scenario #2:   Option Assigned

       If the covered called is assigned before or at expiration, my capital gain would be increased by the amount of net premium collected.


     An investor in the capital markets can make money 3 ways from a cash flow perspective.  These 3 ways are interest, dividends, and option premiums.  An investor can sell a covered call when they are slightly bearish on the stock and want to make some extra income.  Investors can also sell covered calls, as they would like to be paid for something they are willing to do (Sell at strike price) anyway. 

Please Note:  Rogers Communications trade on both the NYSE and the Toronto Stock Exchange.  The stock trades on the NYSE under ticker symbol RCI.  The stock trades on the Toronto Stock Exchange as RCI.A and RCI.B
   I will update my investment tab speadsheet in earlier April to reflect this transaction:

Disclosure:  Long RCI.B, SJR.B

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.

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