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The Carlyle Group(CG-Q)
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September Covered Calls Trades On Dividend Stocks Update #2

Stock Picking, Options Trading for Income - Tue Sep 19, 2023

By Donald E. L. Johnson

Cautious Speculator

  • How to use covered calls to save bad trades.
  • It often takes months to turn a losing trade into a winner.
  • CG may be a buy for other traders.

Sometimes a trader has to work the spreadsheets to figure out how to account for a losing trade that was saved by hedging the trade with covered calls plus dividends over, say 484 days.

On May 20, 2022, I bought The Carlyle Group (CG)  for $34.9465 a share and sold covered calls on it. Over the next 484 days I collected CG dividends and covered calls options premiums that totaled $7.34 a share.

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On Aug. 30, I thought the market would sink after its recent rally. So I sold CG 9.15.23 expiration $30 calls when the stock was at about $32.03. My bet was that on 9.15.23 the stock would close below $30. That would have allowed me to pocket a high premium and sell calls on the stock again.

The market rallied and on Sept. 15, CG was at $32.68. My net debit was $27.61. This means that when I sold CG at $30 minus $27.61 my profit on the trade, thanks to $7.34 per share individends and mostly out of the money covered calls options premiums was $2.39, or 6.83%. I may have also sold some out of the money puts along the way that reduced the net debit. I did these trades only when the premium prices were high enough to make the trades relatively safe from being assigned, until this month.

The lesson is that when a stock or ETF trade becomes a loser, a trader can sell covered calls and puts while collecting dividends to generate enough income to turn a 14% or worse loser into a winner. This may be known as a Jackson Street Hedge, thanks to the Chicago Board Options Exchange.

That CG is rallying may mean that it’s a good time to buy the stock and sell covered calls. But even though this trade was done in an IRA, I’ll wait about 32 days to make sure that I don’t turn the loss into a wash trade in the eyes of the tax collectors.

Click on images and zoom in for better views of the data.

Now you know why the red type entry and red type footnote are in the above image.

On Barchart.com, CG is a 56% buy. Amazon.com Inc. (AMZN) , which I bought today and sold covered calls on, is an 88% buy. The buys on the list are my bullish momentum trades and the sells are former buys that I’m trading calls on like I did with CG. And some of the sells are speculative bottom fishing trades.

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On the date of publication, Donald E.L. Johnson had a position in: AMZN, CPB, DHI, DOW, ISRG, KHC, KR, NEM, PAYC, PG, SJM. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.