February Option Investing – Covered Calls

Better late than never…

After posting my January cashflow report, I realized my February option post wasn’t up…probably caused some confusion if you saw me meeting goals without any trades!  My bad.  The following will get everyone back on the same page.

My January calls for DRN, EDC, ERX, and FAS were exercised, and the TMF call expired.

My basic technical analysis for January confirmed that the longer-term downtrends (broken in December) were complete, and we were about to see whether an uptrend was truly underway or we were still directionless.  TMF broke through its uptrend, so I was forced to sell my shares.  Better to take a small loss now than a larger one later.

Since I’m trying to improve profitability in 2012 by monitoring capital gains, I decided to use out-of-the-money (OTM) calls.

I entered orders on Monday for the ETF’s, but sat on the shares because of that day’s strong upward price action in the general market.

  • DRN – $57.27
  • EDC – $98.94
  • ERX – $51.97
  • FAS – $82.22 (UPDATE – Assigned on Feb 3rd)
  • FAS – $90.04

Even though sitting on the shares cost me some time value, the leveraged ETFs more than make up for it due to their exaggerated intra-day price movements.

  • DRN – $63.01 call @ $2.00
  • EDC – $110.00 call @ $3.30
  • ERX – $53.00 call @ $2.35
  • FAS – $83.00 call @ $0.62 (UPDATE – Expired Jan 27)
  • FAS – $85.00 call @ $1.00 (UPDATE – Exercised Feb 3)
  • FAS – $91.00 call @ $1.36




About T. Knight
Blogging about my journey to financial independence via investing for cashflow.

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