Covered Call Trade Idea with Monthly Options - Generate $50/mo from this Soccer Club Stock

This is not a trade recommendation, this is a trade idea. I'm not a financial advisor, anything written here should be taken with a grain of salt. I take no responsibility If you will decide to invest

A couple of weeks ago I was talking to my brother and we were talking about European football clubs and stocks, my bro suggested maybe it's wise to buy some football club stocks, on which I replied - they are not listed on exchanges. I was wrong.

Today I did a random Google search and found out there are at least 11 football clubs listed on different exchanges across the world. See: 11 Soccer Stocks You Can Invest In

in this article, I will name just one, probably one of the most popular European clubs - Manchester United

Generate monthly income selling covered calls on MANU stock

On May 29, 2020, you could buy 100 shares of NYSE listed MANU stock spending $16.61 per share or $1,661, and simultaneously sell out of the money June 19 expiry covered call at the strike price of $17 for about $0.55. That gets you $55 and makes about a 3.3% return in  21 days. About 56.1% annualized. Break-even: $16.06

Selling covered calls with MANU
Selling covered calls with MANU, data source: finance

If MANU stock closes below $17 on June 19, you keep the premium and start over.

If the stock closes above $17, your stock gets called away, but you keep premium $0.55 + realize value gain $0.39 ($17- $16.61) from selling stock higher than you bought. Total $94 or about 5.6% potential income return in 22 days.

There are several options you could use not to get shares called away, like a roll-up or roll forward. Or you could sell the stock, and start over by writing cash-secured put and get stock back.

Remember, you are selling one contract, 100 shares of MANUstock, make sure you have 100 shares to sell if called away.

The biggest risk  - involving in covered call strategy - the stock price could fall below our buy price and stay there for months/years.