In the final 30 minutes of trading today, as the monthly option cycle was coming to its end, I made one last trade for the day.
I had already surprised myself by not paying attention to the strategy I was planning to execute this morning with Marathon Oil.
I further complicated matters by actually opening 2 new positions today, something I don’t do very often to end the week, unless one of those shares is going ex-dividend to start the coming week.
I also ate into my cash reserves.
Add to that the final trade.
That trade was to rollover the deep in the money shares of Best Buy that I purchased on Wednesday.
Ordinarily, I probably should have been content to settle for the 3 day ROI of 1.1% and let it go.
In the case of Best Buy, my expectation was that since it was, in fact, ex-dividend on Monday, and closed the week at $45.71, a full $2.21 above the March 24, 2017 strike that I had sold, that it would get called away from me prematurely.
I would have been fine with that, as the bottom line would still be the same.
A 1.1% ROI for 3 days is pretty good, especially when shares were purchased with an almost 1% cushion, having sold the in the money call.
With a $0.34 dividend, or a 3% yield, the likelihood was very high that the March 24, 2017 $43.50 calls would get exercised tonight.
But I broke another rule today, in addition to the ones mentioned earlier and in today’s previous posts.
I got greedy.
I want that dividend or at lest I want a substitute for it.
What I am now hoping is that by rolling it over to the April 21, 2017 expiration, even though only for a paltry $0.08 premium, there will still be a good chance that the new $44 calls will still be assigned early.
I’m not convinced that will be the case, even as shares closed $1.71 over the new strike, well above the $0.34 price drop ahead as shares go ex-dividend on Monday.
The upside is obvious if someone does take the bait.
Although I wouldn’t get the $0.34 dividend, I would get the extra $0.50 from the new strike and I would still keep that paltry $0.08.
Even after expenses, I would rather have $0.58 than $0.34, especially if I didn’t also have to wait until March 24, 2017 to have a chance of cashing out shares.
If, however, shares aren’t assigned early, that additional $0.50 in strike price and $0.08 premium, get supplemented by the $0.34 dividend.
In other words, if having to hold onto shares until April 21, 2017, there’s an additional $0.92 involved, which is a bit more than 2%
That’s not a lot for a 5 week month, but in these days of low volatility, it’s pretty good, especially since there’s also a nearly 4% downside cushion.
A month from now, I will either feel like a genius or an idiot or maybe just pleased if the trade is still alive and capable of generating some more income.
Two of those three aren’t such bad outcomes.