Covered Call Adjustment

Over the last two days I have changed my position in my holding of MED. I bought back the March $10 call, which I had sold at $.50, for $.10. Today I sold the June $10 call for $.75. This is a 7.7% premium on the current share price.

I have collected a net total of $195 of option premium less commissions of $28 on 100 shares (single option contract trades) of MED. I originally purchased the shares for $9.75 and they are currently trading for $8.43, so I am pretty close to even. I still think it is a good stock and I have upside to the strike price of $10.

The volatility of MED has allowed me to trade in and out of the options for good premium. However, trading a single contract at a time causes commissions to eat up a good portion of possible gains.


11 Responses to “Covered Call Adjustment”

  1. The Travelin' Man Says:

    I am an options newbie. Can you explain why you bought back the March 10s? Do you think that the stock will hit $10 in the next two weeks and get called away, or did you need to buy the calls back so that you could write the June 10s?

    Also, I am sure that you have considered this before now, but Zecco offers options trading at $3.50+.60/contract. It’s not much, but since you say that this small volume makes the transaction costs important, $1.50/ea may be enough to consider.

  2. planetim Says:

    Thanks for the response. I have sold and bought the calls on MED twice. As the stock has risen and fallen I have been able to increase my collected premium each time.

    I keep doing this because I still believe MED is a good stock and will get to $10 sometime. I sold the June contract, because the May does not come out until after the March expiration, and I was too impatient to wait.

    I am not familiar with Zecco, so thanks for the heads up.

  3. The Travelin' Man Says:

    I just opened my account with Zecco (I have no vested interest in the company other than as a customer), and it was pretty pain-free. I will likely not use this as my only brokerage account – at least until I am very confident in their business model, product, and service. But, as they say, free is free!

    If you choose to open an account, I will only advise you to make sure that you choose the money market sweep option, the ability to trade options request, and anything else at the beginning of the sign-up process. Apparently, any changes you want to make to your account after the sign-up requires paperwork to be sent, which seems a little onerous to me.

    Thanks for the details on the MED calls.

  4. Minesh "The Monthly Cash Man" Bhindi Says:

    I know EXACTLY what you’re saying about only trading single contracts and having commissions completly EAT up your profits.

    One strategy I use is to do covered calls where the majority of the cost of the share is paid for up-front.

    It’s easy to do, and it gives you a hell of a lot of downside cover (an added bonus 🙂 )

    Check out my website:

    Happy Investing,

    Minesh Bhindi

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