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32 October 2023 Covered Calls Trades Update #2

Stock Picking, Options Trading for Income - Thu Nov 2, 2023

By Donald E. L. Johnson

Cautious Speculator

  • October covered calls trades generated annualized returns of 17.85%.
  • Dollar General and Verizon were October’s big winners.
  • Paycom Software and Pfizer were October’s big losers.

The 32 October 2023 covered calls options trades generated average annualized 17.85% returns in options premium income and 2.62% in dividend income, annualized.

Please click on images and zoom in for better views.

Deltas indicate the probability that calls will be exercised. When the trades on these 23 stocks and 2 exchange traded funds were done, the average delta was a relatively high 26% probability. The deltas when the trades were done ranged from .14 on the (AMZN)  call optionto .78 on the General Mills (GIS)  trade.

The leading indexes were flat during the last month when the S&P 500 index ($SPX)  was up 0.28%.

During the last month, 11 of the stocks and 1 ETF gained in flat markets. They included AMZN, Campbell Soup Co. @CPB, Dollar General Corp. (DG) , D.R. Horton (DHI) , Duke Energy Corp. (DUK) , General Mills (GIS) , Kimberly-Clark (KMB) , Kroger Co. (KR) , Newmont Mining Corp. @NEM) Proctor & Gamble Co. (PG)  and Visa Inc. (V) .

October’s biggest winner was Dollar General (DG) , which was up 27.68%, mostly after it was called on Oct. 6. Verizon (VZ) was up 11.8%. VZ was called on Oct. 20.

Paycom Software Inc. (PAYC)  lost 43.35% in the last month. It’s down 55% from the $330 I paid for it. PAYC offered a new product that cost less than its original service, which is being cannibalized by the new, lower-priced service. Analysts don’t seem to think Paycom will recover from this blunder. I’ve been selling high yielding covered calls on PAYC.

On Nov. 1, I bought back the PAYC 11.17.23 $300 calls for $0.05. That left me with a $4.73 per share profit on the PAYC covered calls contract for 100 shares. That cut the trade’s duration to 15 days from 31.

Then, when PAYC was at $153.99, I sold PAYC 11.17.23 $180 strike covered calls for $1.40 a share. That reduced the net debit on PAYC to $316.92 per share. At the moment, the stock is at $148.05, down 53.3% from the net debit price. It will take a long time to make up for this loss by selling PAYC covered calls and cash secured puts for options premiums. Before the end of the year, I may take a tax loss on the trade. Fortunately I own only 100 shares of PAYC. So I’m down about $17,000 on a $33,000 trade.

Pfizer Inc. (PFE)  fell 10.71% in the last month on a weak earnings report and weak guidance. In addition to paying a 4.1% dividend, PFE is a good options stock for sellers of covered calls. It goes ex-dividend on Nov. 8. My net debit on PFE is $39.36. rates PFE a 100% sell. The highest target price posted by a Wall Street Analyst is $75. The average target price posted. by analysts is $42.12 and the low target price is $33. PFE is almost over sold with a relative strength index (RSI) of 33.02. If I take a loss on this stock, it will be because I can put the proceeds into a better stock. Because of PFE’s high dividend, it is in a tax sheltered IRA and it is not a candidate for a tax loss sale.

As of this writing, most of these stocks are sells. AMZN and V are 64% buys.

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On the date of publication, Donald E.L. Johnson had a position in: AMZN, BG, CPB, DHI, DOW, DUK, GIS, ISRG, KHC, KMB, KR, MRK, NEM, PAY, PFE, PG, SJM, VZ, WBA, XBI, XLY, ZBH. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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