One of the positions in my Long-Term account is $T. The thesis here is that this is a leader in the mobile space and should continue to see growth as more cell phone users move into smartphones and 3G/4G tablets.
What I would like to cover in this post is how selling Calls against a position can earn income and improve the overall net return – even when the underlying positions is flat from your entry (mine was in May 2012) or has a minor gain.
Here is the breakdown:
- Long the stock on May 9 2012 with an entry of $33
- I have sold Calls against this long position, or built a Collar, several times since long stock entry:
|StO June 36 Call (& expires)||0.23|
|StO Aug 36 Call for .22||0.22|
|BtC Aug 36 Call at .47 on 7/26 (-.25)||-0.47|
|StO Aug 38 Call at .82 on 8/3 (& expires)||0.82|
|StO Oct 38 Call for .31 on 10/5||0.31|
|BtO Oct 37 Put for .18 on 10/8 (now a Collar)||-0.18|
|StC Oct 37 Put at 1.56 on 10/16||1.56|
Currently price is at $33.73 so I have a small gain on the long stock position (not including dividends). But when you include the $2.49 in gains from the Option trades against the long stock, that is a nice bit of income.
So in summary, if you have long-term account positions don’t just let them sit there – put them to work.