Sold 5 Covered Calls on WPG stock - Potential to Break Even Our Original Investment in 213 days (Recovery trade)

On June 16, 2020, we sold 5 covered calls on WPG stock, with a long expiry date in January 2021. For this trade, we got a $200 premium (before commissions)

Long story short - we have been buying and holding WPG stock for dividends, since late 2018, at the start, it seemed like a nice dividend stock. We have been buying this stock at $7, $5, $2.5.. one of our latest buys were at the stock price at $0.86.

Using dollar cost average, our cost basis per 1 WPG share is $2.92

WPG has been called a rotten egg in the REIT basket.

For most of the time we were holding WPG it paid a very very hefty dividend - 15%, 20% and even 25%.. now the dividend is trimmed to a minimum. 

As we were sitting with 500 shares with WPG stock, and not wanting to take a possible bankruptcy risk, we decided to sell the following contract:

  • SLD 5 WPG JAN 15 '21 2.5 Call Option 0.40 USD

this gives us USD 200, a nice cushion for our original investment of $1,460.84. About 13.69% yield from our original investment. Also during the road, we have collected in dividends of $151.30. Total income from options + dividends so far $351.30 or 24% yield (since 2018). Taking both dividends and options income our break-even price for a single stock now is $2.21.

Selling Covered Calls on WPG Stock
Selling Covered Calls on WPG Stock

In case our shares will get called away at 2.5 we will realize a nice value gain of $145 (5*29) or about 9.9% income in about two years. Not the biggest addition to the portfolio, but knowing all the history with WPG, such scenario now seems very very much waited. 

This trade comes as the #13 in the month of June, and if we stick with our trading plan for this month, premium generated from this trade makes us about 31.33% from our $600 monthly goal, while in total we have already reached 136.90% from our goal in the first 16 days of June. Awesome.