Covered Call on PNNT - Potential income return 6.01% in 169 days (12.92% annualized)

On December 31, 2020, we bought 100 shares of PNNT stock and simultaneously sold 1 covered call on it, with an expiry set on June 18, 2021. For this trade, we got a small $30 premium (before commissions).

PNNT is (was) one of our favorite dividend stocks, which we, unfortunately, lost during the March 2020 downturn in the markets. We have been holding this stock in portfolio since September 2018

When looking on this stock now, we bought it for our dividend portfolio

This trade comes as the #54 in the month of December, according to our trading plan for this month, the premium generated from this trade makes us about 2.50% from our $1,100 monthly goal. While in total we have reached already 235.38% so far. Awesome. 

here is our trade setup:

  • SLD 1 PNNT JUN 18 '21 5 Call Option 0.30 USD

what can happen next:

PNNT is trading below our strike price of $5 at the expiry date (June 18, 2021), in such case, we keep the premium and sell more covered calls to lower our cost basis. 

In case PNNT is trading above our strike price of $5, our 100 shares get called away at the strike price of $5 and we realize our max gain $68.2 or 14.85% potential return of income in the next 169 days (not counting in dividend)

Break-even: $4.32

Selling covered calls with PNNT stock
Selling covered calls with PNNT stock
  • Running Total  2 Trade since December 31, 2020
  • Options income $28

With holding 100 shares of PNTT we could get an annual dividend of about $60 (before tax), with selling covered calls on PNNT we could double the income in the same period of time.