This afternoon I was filled on JBL Calls while I was away from my computer.
Today was a very busy day for me. I was at my computer this morning but had to leave my office early. I placed orders for 4 trades but was filled on 1.
I just got home from a long day not of the house. I was filled on a 10 contract 1/31/20 $44 Call with Jabil (JBL).
On 12/9/19 I bought a 10 contract LEAPS with JBL. This has a Strike Price of $42 and won’t expire until 1/21/22. Dedicated readers know I like to sell Calls against my LEAPS. These positions are called Diagonal Bull Call Spreads, or just Diagonal Call Spreads. This is when you form a Covered Call my selling a Call against an option position instead of buying the stock to cover the Call. The LEAPS option must have a longer contract, and the Strike Price must be higher than the Strike price of the LEAPS. In this case my LEAPS has a Strike of $42 and the Call I sold has a Strike of $44. This is consider covered because I have the “right” to buy the stock at $42 if I have to deliver the shares at $44.
Sell to Open 10 JBL 1/31/20 $44.00 C @ 35¢ (+$350)
This Call only gave me 35¢ premium for $350. With a $42.10 stock the premium is not the 1% I look for. This is not my normal trade! When I sell Calls against my LEAPS I just want to bring in some money while holding my long term LEAPS option. This is one of the moves that makes options trading so great. The reason the premium is a little lower is because I go a little higher on the Strike Price because I don’t want to get assigned. This Call will not expire until 1/31/20, 16 days away.
The stock is at $42.10. I don’t think I’ll get assigned at $44. Either way they’ll have an extra $350 in my account.
Sorry for the late notice.
Successful trading,
Steve
The Options Coach