The Investment Road to Freedom

February 20th, 2015 at 4:38 pm

Option Trades – Ford and AT&T

Yesterday I did two option trades with Ford (F) and AT&T (T).

First up is AT&T. I brought back my Feb 2015 $34 put for $0.15 costing me $29.27 including commission. I then sold the Mar 2015 $34 put for $0.54 earning me $39.02 after commission for a net credit of $9.75. The reason for this trade was that today was expiration date and I did not want to own the shares yet until I had my cost basis down lower. I contemplated letting my Feb $34 put expire but I was not sure if it would close above $34 – which it did being $34.08. There was no dividend involved which could have swayed me to owning the stock now. The next ex-dividend date will probably be around 3/27. I started selling puts on AT&T in December and so far have earned $66.79 and my cost basis is currently $33.33. This is in my IRA.

Ford is a big player in my portfolio with 200 shares in my taxable account and 100 in my IRA. Yesterday in my taxable account with the stock at $16.45 I brought back my Mar 2015 $16 covered call for $0.64 costing me $78.97. I then sold two Jan 2017 $22 covered calls for $0.53 earning me $91 for a net credit of $12.03. In this account I’ve owned Ford since March 2012 and I expect it to one day be my first stock that I get the cost basis down to zero. One day many days from now!

Like with all my option trades I always look back and see if I could have done things different. When I say different I mean better! With T I had the opportunity to buy back my put at $0.05 on Tuesday and with my broker at that price and below for options you pay a reduced fee ($4.95 compared to $14.95). I probably should have brought it back at that point but I thought it would end the week above $34. It looked like it would then Wednesday to today it dropped a little but finally ended up over $34. No big deal still making profit until I’m ready to accept the shares. But I want it to be on my terms.

My Ford play I could have brought back the one March $16 covered call and sold two $17 covered calls a little further out. But I went with safety of my shares first and went to $22 which it has not seen since the beginning of the century. If it gets back there I will be delighted. If the $22 gets under-threat then I will buy back and go further out at that time. In this account Ford has earned me $98.50 in dividends since March 2012 and $98.19 in options income for a total of $196.69.

 

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