Sold 1 Covered Call on ARCC - Potential income return 7.92% in 175 days

On March 30, 2021, we sold 1 almost covered call on ARCC stock expiring on September 21, 2021. For this trade, we got a $40 premium (before commissions).

This trade comes as #195 in the month of March, according to our trading plan for this month, the premium generated from this trade makes us about 1.88% from our $2,000 monthly goal. While in total we have reached already 302.54% so far. Awesome.

Ares Capital Corporation (NASDAQ: ARCC) is a market-leading Business Development Company and one of the largest direct lenders in the U.S.

We sold a covered call, despite we are holding just 32 shares with this stock. In case our strike price will get touched, we will have to buy the missing 68 stocks in the open market (~ $1,320. There are two reasons why we sold a covered, before reaching 100 shares:

  • it helped to increase our buying power
  • we feel confident enough to take this little risk

As we have been buying ARCC using dollar-cost averaging our average buy price is $18.88

here is our trade setup:

  • SLD 1 ARCC  SEP 21 '21 20 Call Option  0.40 USD 

what can happen next:

ARCC is trading below our strike price of $20 at the expiry date (SEP 21, 2021), in such case, we keep the premium.

In case ARCC is trading above our strike price of $20, we are troubled as we have to deliver 100 shares at the price of USD 20, to avoid that we will try to roll up and for credit. Our max gain $149.6 or 7.92% potential total income return in 175 days

Break-even: $20.37