Last month I wrote how to make some easy money by selling a put option for Teck Resources. The option expired several days ago and I made $48. Cool beans! Since my trade was successful I decided to do it again. So after the option expired I sold another put option for TCK.B for the strike price of $23, that will expire in August. The most I could potentially make from this trade is $52.76 🙂 By repeating this simple trade on a regular basis I could make a few hundred dollars every year with minimal risk! Not a lot of money, but better than nothing.
Just like before, there are only 2 potential outcomes of this event.
Scenario 1- By August 16th TCK.B shares stay above $23/share. So when the contract expires I keep the $52.76 premium with no strings attached
Scenario 2- By August 16th TCK.B shares fall below $23/share. The contract is exercised and I’m forced to purchase 100 shares, but still keep the $52.76 premium.
Ideally I would like scenario 1 to happen, but scenario 2 isn’t a bad outcome for me either. When I originally bought 61 shares of Teck Resources years ago I purchased the stock at roughly $33 per share. I realize now that I overpaid. Teck is one of the few companies that has under performed in my portfolio 🙁
But investors have a tool at our disposal called dollar cost averaging. This means if our investment falls after we buy it, we can simply buy some more to lower our average purchase price. Since the whole point is to buy low and sell high, by lowering the average price that we buy at we don’t have to wait for the stock to increase as much to make a profit.
So even if my option gets exercised I’ll be happy to pay $23 per share which will lower my adjusted cost bases to about $27 instead of the current $33. Selling options is fun 🙂 Since no leverage is used there are no extra costs like interest. Speaking of interest, I recently wrote an article for mint.com showing how faster credit card payments can save consumers a lot of money.
Random Useless Fact:
The World Cup can perform miracles
Your options information is great. I have been thinking of writing puts or doing covered calls for a long time. But what really put a smile on my face was that World Cup photo. Thanks!!!
I hope Germany wins this year 😀
I always go for Cameroon. They seem to qualify for every cup but can’t manage to advance.
Congratulations on success of your first option trade. great job man! I’m still little scare to do options trading.
So, what is your next move in option? I am waiting to see 😀
I’m not sure yet either. But I’m kind of itching to start another swing trade on the VXX instead 🙂
Your first option trade ended the way you wanted. With naked puts, you win regardless if the stock goes up, down or sideways. My first naked put got exercised.. I am trying to write a covered call on it now with a limit order. With my option exercised, I believe RCI.B goes ex-dividend soon, so I will qualify for dividend..
I think you have a very solid options strategy of timing it with the dividend cycle 🙂 I’ll need some further practice before getting more experienced like you. Thanks for the tip on RCI.B. It’s option premiums look pretty attractive.
Apparently, Rogers went ex-dividend on Jun 13, so I will not qualify for the dividend getting paid next week on July 2. I definitely read it wrong some where that Jul 3 was the ex-dividend date.
Congratulations on the success of your option trade! That was a great job. Many people would love to try that but just afraid.. I am looking forward to see your options more. 🙂
Thanks Tef 🙂 I’ll write more about it in the future.
Nice job Liquid! Always good to be on the winning side of things. I would like to learn how to trade options successfully like you! Keep the money rolling in. Looking fwd to your next option trade!
Thanks. I’ll keep everyone posted 🙂
I write a few covered calls, especially on Stocks that I want to sell anyway. Selling a put on a stock you want to buy is another great strategy.
Whether or not to put more money in a declining stock in another matter…
I sold a covered call last month. It’s expiring in a couple of months. I’m anxious to see what will happen.
I am trying to figure out a good option strategy as well. I am overweight in APPL and I will try writing monthly covered out of the money calls until one hits reducing my position which is what i eveentually want.
For the majority of my holdings I want to keep long term so writing calls I am thinking will be counterproductive.
However I am thinking of making 1-3 overweight positions in my portfolio where I focus mainly on writing calls to generate more income. Possibly some monthly dividend payers to further insure income as well.
The thing with options the strategies are endless. But whatever works for u is all good. Things do get a bit confusing tho with all the information!
Good Day and Get you Option Grind On!
That sounds like a nice plan, especially for balancing out your holdings. You either make some income or have a more diversified portfolio 🙂 Enjoy your weekend.