Covered Call on GPS - Potential income return 3.77% in 11 days

On May 18, 2020, I sold 1 covered call on GPS stock  - a position established last Friday at the price of $9 per share (assignment).

We have been selling covered calls with great success on GPS during the month of May, and now we have in total 2 covered calls with two different strikes and expiry dates.

In this article, I will focus on the latest trade, though calculations for both trades are used at the end of artic.e

Here is the trade setup:

  • BOT 100 GPS Stock 9 USD
  • SLD 1 GPS MAY 29 '20 9 Call Option  0.34 USD

what can happen next:

GPS is trading below our strike price of $9 at expiry date (May 29, 2020), in such case, we keep the premium and sell more covered calls to lower our cost basis. 

In case GPS is trading above our strike price of $9, our shares get called away at strike price $9 and we realize our max gain  $34, or 3.77% potential income in 11 days

There is no room for value gain left, as we established this position on a losing trade (bought at $9, when GPS were trading $7.6)

Covered call with GPS

  • Running Total  5 Trades since May 1, 2020
  • Trade P/L $99, with capital at risk $1,659
  • 5.96% income from premium
  • Potential max return if shares called away: 8.43% in 28 days