Tuesday, August 3, 2021

NEW UCPTD Trade | CCW Buy Back and Roll CMI ($265 Prem Profit)

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NEW UCPTD Trade | CMI - CCW Buy Back and Roll ($515 - 45 days)
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NEW CCW TRADE
Covered Call Option Buy Back / New Covered Call Trade
Covered Call position was closed and opened on
TIME AND DATE STAMPTuesday, August 3, 2021
Cummins Inc
DISCLAIMER: This trade is based on this date. I'm not suggesting a move up or down. I'm showing my trade that I have already done. I'm not recommending this stock as a purchase/trade. Think of it like this, I'm 'Showing you the World thru my Eyes'.
My brief explanation for this trade and how it closed
WHY I CLOSED EARLY - Below I explain why I did this Buy Back early
Trade is CLOSED - Earnings out, things are good at Cummins so my $5.50 CCW Prem being just 0.30 ... we buy back and will look to sell something AND try to capture the dividend as its Ex-Date is ~8/19
1st Trade Premium +/-$515.00CoC% Gain2.13%
WHY I DECIDED TO ROLL - my thoughts on why I rolled this option
CCW - With earnings behind CMI and now an Ex-Date of August 19 ... I’m going to sell this September Covered Call 45 day $250 strike ... my cost basis is 250 and I pick up $1.30 premium + $1.35 in dividend and it becomes a profitable trade as my stock purchase price is $250 if my shears are taken away at this strike
This (45) day trade begins and ends for the dates below
45August 3, 2021September 17, 2021

MAX PROFIT - Premium Only (Strike = Stock Purchase Price)
TRADE KRUM!DAYSCash on Cash %CONTRACTSSHARES
$265.00451.06%1100
How I could 'Manage' this trade?
I could manage this Covered Call - #1 - The stock moves and closes on expiration above my strike price. My shares will be given assigned to the Call Buyer, I will be given cash for my shares (strike price)
I could manage this Covered Call - #2 - The stock does not close at or above my strike by expiration, I will likely not have my shares taken from me. I keep my shares, I keep the Covered Call premium. Trade ends. Shares become available to trade.
I could manage this Covered Call - #3 - Regardless of where the stock moves during the Covered Call timeframe, a news event or Ex-Date prompts the Call buyer or market maker to take my shares before expiration. Most common situation, the stock has moved up and now trades near or above the strike price making it profitable to exercise the Call option early for the Call Buyer to collect the dividend.
Selling Premium Education Corner (definition and links)
Covered Call - Description - A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities. ... writing - i.e. selling - a call generates income in the form of the premium paid by the option buyer. Source - https://en.wikipedia.org/wiki/Covered_call
Disclaimer - Yes - at the time of this posting I do own shares. I am by no means recommending this stock for purchase
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All of my CPT Abbreviations and Acronyms can be found below
https://cptdashboard.blogspot.com/2021/02/CPT-lingo.html
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