[24 Jan Trades] As Market Falls, My Returns From Selling Covered CALL Increases

There is more pain in the US stock market today (24 Jan 22) as stocks continue to sell off, at an even more aggressive rate than ever. Many stocks on my watchlist are down at least 3% and some stocks are down more than 10%.

With the market in bearish mood, I continue my strategy of rolling covered call contracts to keep collecting more premium with every new contract closed and opened.

I closed my covered call positions that I started just 1 trading day ago on 21 Jan 22 and here are the profits that I have secured (see bold brackets in the table below).

Name of StockStrike Price (USD)Premium Collected (USD)Returns (%)
Pinterest30112 —-> (57)1.78 –> (0.90)
Nio28118 —-> (100)2.65 –> (2.24)
Palantir1414 x 55 = 770 —-> (546)2.66 –> (2.64)

I then open up new weekly covered call positions for these 3 stocks, with the same expiration date (28 Jan 22) but at a lower strike price, and collected a total premium of USD2.42k. I raised the stakes higher by selling ITM CALL options for 2 of the 3 stocks, Palantir and Nio.

The respective returns for the 4 day-contract are as follow:

Name of StockStrike Price (USD)Premium Collected (USD)Returns (%)
Pinterest29941.48
Nio241433.21
Palantir1114 x 156 = 21847.5

If the share prices of these 3 stocks continue to fall and close below the above strike price on the expiration date, I will not be obliged to sell any of my shares.

If the share price continues to plunge, I will keep repeating this process of closing the positions and opening up new positions with a longer expiration date or a lower strike price.

This strategy helps me to keep generating returns when the share prices are falling and helps to reduce the average (breakeven) prices of the stocks that I own. The risk of this strategy is covered in my previous article and you can read more about it here:
How I Do Earn Even When The Stock Market Is Bearish?

In the month of January 2022, the returns I made from selling covered calls are as follow:

  1. USD2.973k (confirmed gain)
  2. USD2.421k (premium from open contracts)
  3. USD276 (loss from closing contracts)

The total capital used to achieve this is USD39.6k, which comprises 100 Nio, 100 Pinterest and 1400 Palantir shares.

Return of Investment for Jan 22 (confirmed nett gain) = (2.973 – 0.276) / 39.6 = 6.8%

***
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If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?

I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day

I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
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I Cut $135,715 Worth Of Losses In The Last 1.5 Months

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4 thoughts on “[24 Jan Trades] As Market Falls, My Returns From Selling Covered CALL Increases

  1. yep. volatiltity has spiked and its good to continue writing options eventhough existing short put position are down despite being OTM. i have a target on the amount of premiums i will collect each month and for month of jan, already collected way beyond target. the target was set so that i do not write too many puts such that if all get assigned (chance practically 0), i still can fulfill my obligation as a put seller. cos premiums can be pretty addictive and before one knows it, the inherent risk increased a lot. not so much for your case as a cash secured writer but more for margin writers like myself. cheers bro. Raymond.

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    1. Hey Raymond, thanks for sharing your winning returns! Really glad to hear that you have exceeded your target in a month when everyone else has been losing a lot of money due to the huge market selldown. Congrats on your achievement and keep it going!

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      1. Hi Jason. my portfolio also red. with market tanking and expanded volatility, inevitable to have red paint for put sellers. part and parcel of doing business. most important is to stay the course. fundamentally good companies eventually recover. cheers.

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      2. And yes, I totally agree with that! I am shifting my strategy to accumulating 100 shares each of my favourite stocks to do the Wheel strategy 🙂

        Like

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