Recent Sale

 On October 1, 2018, I purchased 100 shares of Telus Corporation (T.TO) inside my margin account.  I purchased with the attention of selling covered calls.  A covered call is when you sell (or write) a call option when you own the corresponding number of shares for said contract.

When selling covered calls, the individual is obligated to sell their shares at or on expiration date.  For this obligation, the seller of the call option is paid upfront an option premium.  The option seller gets to retain this premium regardless if the stock moves up, down or sideways.  If the price of the stock is $0.01 above the strike price at expiration the option will be assignment.

The initial cost basis of the shares is $4743.30.

Total dividends received = $109.00
Total Options received = $78.10 ( $44.05 and $34.05 on 2 trades )
Option Assignment Fee = $24.95
Strike Price = $48.00

When a covered call is assignment, the premium is added to the proceeds of sale resulting in a larger capital gain or capital loss for tax purposes.

When the covered called is not assigned, the gross proceeds of sale is the premium received and the outlays and expenses is the commission for the option trade by your brokerage.  The adjusted cost basis is $0.00.


Summary:

Net profit on assignment = # of contracts * strike price * 100 shares + net premium - assignment fee
                                         = 1* $48 *100 + $34.05 - $24.95
                                         = $4809.10

For total return we use all the money received

Total return =[ (net profit on assignment + other premium received + divys )  / ACB on purchase]  - 1
                    = [($4809.10 + $44.05 + $109.00)  / $4743.30]  - 1
                    = 4.62%

The total return is not that high. In the past month, T.TO increased to over $50.00 per share and then retracted to mid $49.00.

Telus currently pays an quarterly divided of  $0.545.  This option assignment reduces my annual dividend income by $218.00 

I will update my investing tab spreadsheet in early May to reflect this transaction.


Disclosure:  - Own 24 shares of T.TO in my TFSA
                        - Long T.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.