On May 29, 2020 we roll forwarded RDSA JUN 05 '20 15 Covered Call for 0.08 EUR credit.
This trade was originally established as a put ratio back spread on May 11: Put Ratio Back Spread on RDSA - 0.7% potential income in 4 days
We got assigned at EUR 14.80 and immediately sold a weekly covered call: Covered Call on RDSA - Potential income return 2% in 7 days as our strike price didn't get reached we roll forwarded this covered call for the next week's expiry: Roll Forward RDSA MAY 29 '20 15 Covered Call 0.19 EUR (Potential income 1.26% in 7 days)
Now, May 29, 2020 was a choppy trading season (just like the previous friday). RDSA didn't reach our strike price at EUR 15, our covered call options expired worthless and we roll forward to the next week's expiry for additional credit.
here is our trade setup:
- SLD 1 RDSA JUN 05 '20 15 Call Option 0.08 EUR
In short, we are not very excited with this covered call on RDSA, but we are willing to roll until our shares will get called away. Collecting EUR 8 is still better than getting nothing.
what can happen next:
On expiry (June 5) RDSA is trading below our strike price of EUR 15, in such case, we keep the premium and sell more covered calls to lower our cost basis.
In case RDSA is trading above our strike price of EUR 15, our shares get called away at strike price EUR 15 and we realize our max gain EUR 0.57 (15-14.80+0.1+0.19+0.08) or 57 EUR in 21 days
Break-even: EUR 14.43
- Running Total 8 Trades since May 11, 2020
- Trade P/L EUR 115, with capital at risk EUR 3,000
- 3.83% income from premium