Here are the holdings in my trading account as of July 19th, 2014:
|Description||Symbol||Quantity||Date Acquired||Cost Basis||Market Value
|NELNET INC CL A||NNI||121||12/11/13||$4,970.79||$5,107.41
|AFL Aug 16 2014 65.00 Call||AFL Call||-1||07/18/14||-32.34||-54.00
Finally, I made a trade! No, I didn’t sell or buy any stocks, but on 7/15 I sold one AFL call option contract. It expires on 08/16/2014 and has a strike price of $65.00.
I sold the call for a premium of $0.38 (a share):
1 contract = 100 shares x $0.38 = $38.00
Net Receipt $32.34
Notice that my cash balance is now $124.06.
Have you ever had the feeling that once you sell a stock, the stock price will go up? Sure enough, once I sold the call, the price of AFL went up. AFL closed at $62.84 on 7/15, the day I sold the call. The stock price continued to go up the next few days and finally closed at 63.71 on Friday 7/18. Last I check, the premium is $0.54 a share. So I could have made even more from selling the call option had I waited a bit longer. So why did I make this trade? When I sold the call, I really didn’t think the stock price would close above $63.50 any time soon. I came to that conclusion because of the price history of the AFL for the past month and given the events going on around world. Boy, was I wrong!
I still have doubts that AFL would hit $65.00 by 08/16/14. The last time that happened was in March of this year. However, if AFL does hit $65.00, not only am I happy to part with the underlying 100 shares of AFL, I would even sell the my other 89 shares.
My only regret is that I didn’t do this sooner. Had I sold a July 19th $65.00 call a couple weeks ago, I could have made some money and still have my 100 shares of AFL stocks today. Options trading is a tool that I often forget that I have. (It’s a good thing that now I have this blog to remind me of it.)
This also brings up another point. In the future, I should try to buy stocks in multiples of 100. If I have 200 shares of AFL instead of 189 shares, I can write another covered call. Because I can’t write any naked calls with my account, I can’t make use of options trading with the 89 odd shares of AFL that I own.
How about NNI? Can I make use of options trading on NNI? If you check the August 16 option chain for NNI, there is not much trading activity going on. If I do put in a order to sell a call, I am not sure if there is enough interest out there for the trade to be executed.
My real bottom line on 7/19/2014: $17,218.66