UPDATE (IRA): TLT NOVEMBER 20TH 165 COVERED CALLS
Last update/refresh of existing positions before I move on to new trades ... .
Here, an "about as simple as it gets" covered call setup in my IRA in 20 year maturity + treasuries with a current yield of 1.64% and paid .19014/share in June (around $19 per one lot) versus a 30-days 'til expiry, one standard deviation short call premium of .78 (currently the September 25th 172 short call), just to give you some idea of what aspect of the setup is paying.
My last acquisition was around $110/share, and I'm inclined to take my money and run at historic interest rate lows, since I think that these have a practical upper bound and will necessarily decline in price when the Federal Reserve gets around to unwinding some of its pandemic-related easing (which is a "who knows when" sort of thing).
Previously, to accommodate some of the downside risk, I overwrote calls using call diagonals (See Post Below) and may do so again here while I ponder whether the buying power tied up in this position is "worth it" for the dividends and/or the short call premium. As a function of stock price, the .19 dividend plus the .78 30-day risk premium for one standard deviation calls is .59% of the underlying price (7.02% annualized) versus the 30-days 'til expiry one standard deviation short put currently paying .60 (.36% of the stock price, 4.34% annualized), so there is some advantage to staying in covered call versus selling out-of-the-money puts from a bang for your buck perspective, particularly since this is a cash secured environment.
That being said, overwriting can be somewhat buying power intensive and can lead to some headaches managing the additional calls if price rapidly gets away from you to the upside.
Here, an "about as simple as it gets" covered call setup in my IRA in 20 year maturity + treasuries with a current yield of 1.64% and paid .19014/share in June (around $19 per one lot) versus a 30-days 'til expiry, one standard deviation short call premium of .78 (currently the September 25th 172 short call), just to give you some idea of what aspect of the setup is paying.
My last acquisition was around $110/share, and I'm inclined to take my money and run at historic interest rate lows, since I think that these have a practical upper bound and will necessarily decline in price when the Federal Reserve gets around to unwinding some of its pandemic-related easing (which is a "who knows when" sort of thing).
Previously, to accommodate some of the downside risk, I overwrote calls using call diagonals (See Post Below) and may do so again here while I ponder whether the buying power tied up in this position is "worth it" for the dividends and/or the short call premium. As a function of stock price, the .19 dividend plus the .78 30-day risk premium for one standard deviation calls is .59% of the underlying price (7.02% annualized) versus the 30-days 'til expiry one standard deviation short put currently paying .60 (.36% of the stock price, 4.34% annualized), so there is some advantage to staying in covered call versus selling out-of-the-money puts from a bang for your buck perspective, particularly since this is a cash secured environment.
That being said, overwriting can be somewhat buying power intensive and can lead to some headaches managing the additional calls if price rapidly gets away from you to the upside.
Trade active:
Rolling from the November 165 to the December 165 on traverse of the short call strike for a .92/contract credit. Still haven't picked up a replacement for this position, so am likely to stick in with it in this "lower for longer" interest rate environment.
Trade active:
Rolling the December 18th 165's down to the 162C's for a .26 credit. It's not much, but didn't want to extend duration on weakness.
Trade active:
Rolling the December 18th 162's out to the January 165's for .33/contract on strength (January's currently 5-wides around that strike, so couldn't roll out "as is"). With the January 15th 165's currently valued at 1.34 at the mid, short call premium continues to far exceed yield in spite of low 30-day IV here (14.0%). The November dividend was a paltry .17/share. A 1.34 59 DTE short call is 8.29 in credit annualized versus TLT's annualized dividend of 2.50.
