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November 20th was option expiry day!

I must say my confidence for covered call option trading as a source of incoming is growing month by month!
I am very happy to say that my five opened positions except one were going according to plan. The only position that went the wrong way was the RCII calendar put spread. As reported in my previous post, I was able to sidestep the problem for now by rolling over the short November $20 put to the December $20 put for a small credit of $0.15. For details and my reason for making the move please refer to my November 17th post.

To follow, I am giving the low down of my calendar put position in CHT. I will also describe the progress of my put spread position in EWH, leaving report of the other two positions EWC and AUY for other times.

CHT
Long 5 contracts June 2010 $17.5 put.
Short 5 contracts November $17.5 put.

The November 17.5 put expired worthless. I was hoping to enter a covered call trade with the assignment of the short November 17.5 put. That did not happen, but prepared the way for entering a covered call trade of CHT directly by buying the shares at around the price at market closing of $17.89 minus the projected $0.60 December $17.5 call premium. Fees will have to be added to the cost though.

The actual value can only be determined when next market opens. If CHT does not deteriorate to any great extent, it will produce very good income months to come. In any case, the down side is very well protected for several months with the June 2010 put in place as it was designed to do.

I shall update on the maximum down side risk after the trade executed.

EWH
Long 5 contracts November $14 put.
Shot 5 contracts November $15 put.

With EWH trading around $15.70 at market close, both sides of the put spread expired worthless. The profit of the trade will be about $109 for an investment of $182, in about 50 days. A very good Return Of Investment.

I will seek a calendar put spread for the follow on. EWH is one of my favourite ETF because it has upside bias and it also pays dividends. A final reason, I believe ETF is ideal for covered call trading because it is backing a group of companies thus it is not dependant on the fortune of a single company.
Another very important point I found about these ETF’s, the strike steps seem very close together. The strikes of both EWH and EWC are separated by a single dollar. I found that gave flexibility for finding the call or put option for the following month’s profit target at any option expiry. For example, My CHT 17.5 November put expired with CHT shares trading at $17.89 at last market close as described a few paragraphs back.

The follow on trade is to sell the December call for the premium. The only choice of strike available is $17.5 because the next strike of $20 although is the ideal choice but does not offer any premium yet. Wouldn’t it be marvellous if the strike of $18 is on offer?