After a massive selloff on 13 Jan 22, the market opened in the green on 14 Jan, which is surprising as the premarket was red. Bank of America (BAC) was down close to 2% following the mixed results from big banks and I took the opportunity to sell a PUT on BAC shares, with a strike price of $50, an expiration date of 18 Feb 22 (35 days) and collected a premium of $275 (5.5%).
I also took the opportunity to load up 3 x Netflix LEAPS (strike price: $1,325, expiration date: 19 Jan 24, premium: $525, expected growth: 5.45) to average down the LEAPS I bought previously. Netflix’s share price has taken a hit over the last 2 months, falling from its all-time high of nearly $700 in mid-November 2021 to its current share price of $515. I still believe in the future of Netflix as it is not just a movie streaming platform but also a movie studio that can produce blockbuster movies and series, such as Squid Game, Money Heist, Red Notice.
As the share prices of my covered call stock positions continue to fall, it is a good thing for the options seller (me) as the premium will drop and I can buy the contract back at a lower price to close it. I close my covered call positions in Palantir and Pinterest to lock in profits and earn $400 in 2 days while the stocks are falling!
I open new covered call positions in these 2 stocks to collect new premiums for next week. So, if the share prices stay sideways or go down, I will be collecting these premiums without having to sell away my existing shares. Otherwise, I will close the contracts and suffer a small loss (depending on how much the share price rises) before they expire next week. This is one way how we can continue to earn some returns in a bearish market.
I hope this sharing has been useful and I wish you all a happy weekend ahead.
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I Cut $135,715 Worth Of Losses In The Last 1.5 Months
4 thoughts on “[14 Jan 22 Trades] Sold BAC PUT, Bought Netflix LEAPS, Roll My Covered Call Positions”
I see you sell PUT ITM rather than OTM, is this better strategy and internet of reward?
Hi Eddie, I am selling ITM PUT as I am bullish on the stock going higher as this is a year of interest hike so bank/ financial stocks will benefit from the higher interest rates that they dish out. Also, ITM PUT gives me a higher return as I lock in future gains into the premium.
Hi. I think u got the terms mixed but no biggie as long as it works. Itm put means the share price is below the strike price. It’s the same whether it’s buy or sell. Itm puts have a greater chance of being exercised before expiration and seller will be assigned at maturity. But since you are bullish, I guess it’s still ok as u are expecting the option to expire Otm. In the meantime, you will be collecting more premiums. Also the 5.5% is actually 57.3% annualized. Cheers. Raymond.
Hi Raymond, oh ya, you are right, I am selling ITM when I am bullish that it will go higher and OTM when I think it will go lower.