Sold Covered Call on LI – 2.96% potential income return in 4 days

On February 22, 2021, we sold a covered call on NASDAQ:LI  stock expiring on February 26, 2021. For this trade, we got a $228 premium (before commissions)

This trade comes as #47 in the month of February, according to our trading plan for this month, the premium generated from this trade makes us about 7.52% from our $3,000 monthly goal.  .While in total we have reached already 131.60% so far. Awesome.

Li Auto Inc., also known as Li Xiang, is a Chinese electric vehicle manufacturer headquartered in Beijing, with manufacturing facilities in Changzhou.

I decided to enter this trade as a buy/write - buying 100 shares with LI at $28.48 and simultaneously selling in the money covered call at a strike price of $27

In the money strike price gives us both a larger premium and some downside protection

here is our trade setup:

  • BOT 100  LI Stock 28.48 USD 
  • SLD 1 LI FEB 26 '21 27 Call Option 2.28 USD

what can happen next:

LI is trading below our strike price of $27  at the expiry date (February 26, 2021), in such case, we keep the premium and sell more covered calls to lower our cost basis. 

In case LI is trading above our strike price of $27, our 100 shares get called away at the strike price of $27 and we realize our max gain of $80 or 2.96% potential return of income in 4 days

Break-even: $26.2

Selling covered calls with LI stock
Selling covered calls with LI stock
  • Running Total  18 Trades since January 19, 2021
  • Options income $848