Sold 1 Covered Call on PBCT - Potential income return 15.02% in 143 days

On March 30, 2021, we sold 1 almost covered call on PBCT stock expiring on August 20, 2021. For this trade, we got a $60 premium (before commissions).

This trade comes as #194 in the month of March, according to our trading plan for this month, the premium generated from this trade makes us about 2.88% from our $2,000 monthly goal. While in total we have reached already 300.06% so far. Awesome.

PBCT stands for People's United Financial, Inc. an American bank holding company that owns People's United Bank. The bank operates 403 branches in Connecticut, southeastern New York State, Massachusetts, Vermont, Maine, and New Hampshire. It is the second-largest full-service bank in New England, one of the largest in the northeast, and the 46th-largest in the United States

PBCT is a dividend-paying stock and part from our dividend portfolio (current yield is about 6% per anum). PBCT is paying a dividend in the following months - February, May, August, and November

We sold a covered call, despite we are holding just 34 shares with this stock. In case our strike price will get touched, we will have to buy the missing 66 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 PBCT using dollar-cost averaging our average buy price is $17.89

here is our trade setup:

  • SLD 1 PBCT  AUG 20 '21 20 Call Option  0.60 USD 

what can happen next:

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

In case PBCT 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 $268.6 or 15.02% potential total income return in 143 days

Break-even: $20.57