On May 22, 2020, our 100 shares of GPS were called away at the strike price of $8
We established this position on GPS on May 1, 2020, by buying 100 shares at $7.59 per share and simultaneously selling 1 covered call contract with 7 days expiry on May 8 for a $0.22 credit, we roll forward this call to the next week's (May 15) expiry then for additional $0.27, and one more time rolled to the May 22 expiry for additional $0.27 credit.
From these 3 sold covered calls we generated a nice options premium of $0.67 per share.
- SLD 1 GPS MAY 08 '20 8 Call Option 0.22 USD
- Roll Forward GPS MAY 15 '20 8 Covered Call Option 0.27 USD
- Roll Forward GPS MAY 22 '20 8 Covered Call Option 0.27 USD
This is yet another good example of how covered calls help generate income. We closed this trade with a hefty +$0.67 premium plus realized a value gain of $0.41
Our total gain $108 profit / 14.22% yield in 22 days
Next, we are going to write a naked put on GPS to collect more premiums and if assigned - sell covered calls. It's called a wheel strategy.