Roll Up ET $7.5 to $8 Covered Call to Protect $0.305 dividend
Roll Up ET $7.5 to $8 Covered Call to Protect $0.305 dividend
This position was originally established on April 28, by buying 100 shares of ET at $7.345 and simultaneously selling covered call with a strike $7.5 for a $0.2 premium, see: SLD 1 ET MAY 08 '20 7.5 Call Option 0.20 USD
Today ET was trading $7.81 and there is just one day left until stock is going ex-div, we are risking of stock being called away and not collecting the dividend.
To protect the dividend it was decided to roll up call strike from $7.5 to $8
BOT 1 ET MAY 08 '20 7.5 Call Option 0.46 USD
SLD 1 ET MAY 08 '20 8 Call Option 0.17 USD
We made this roll-up for a debit of $0.29
Our new break-even price: $7.13 (with collecting dividend)
There are few scenarios what can happen next:
If the stock rallies above 8 before ex-div date, our 100 shares are called away and we realize value gain only:$0.565 ($8-$7.345+$0.2-$0.46+$0.17) or 7.69% potential income
if the stock stays below the strike price of $8, we collect the dividend and start over with covered calls
As long as the stock doesn't fall below $7.13 we make profit
kaupeens Mon, 05/04/2020 - 13:47