My third month of trading options
In June I received $955 in premiums from trading options. That’s more than what I made last month. Yay. 😀
Here are some key points from my options trades this month.
- I sold 13 options, 11 Puts and 2 Calls.
- I rolled my first call option. (highlighted below, CNQ)
- My total trading commission was $20.74.
- I’m continuing with the wheel strategy that I started last month.
- 11 options from previous months expired in June. All 11 expired worthless. 🙂
Here are the transaction details.
Proceeds – commissions = $955.49
Most of my options have the letter “P” at the end – for put options. By selling Puts, I have to be okay taking ownership of the stock at the predetermined strike price. For example, if Disney shares drop from $175 today to $135 by August 20, 2021, I have the obligation to buy it at $135/share.
I chose to trade these options because I already like the underlying stocks. Options allow me to potentially buy the shares cheaper than the market price today. 🙂 I don’t trade options of stocks that I don’t intend to own.
I did a roll-up-and-out on my Canadian Natural Resources (CNQ) covered calls. This means I closed my initial option and simultaneously opened another at a higher strike price with a later expiry date. The reason for the roll was because my option was expiring at the money with a strike price of $44. By rolling it to $45 and expiring next month I received a small gain (income) and get to keep my shares, for now. 🙂
I don’t plan to roll CNQ again. At $45 I think CNQ.TO is over priced. My covered calls represent 200 shares. I currently own 630 shares.
If you’ve been following me for awhile you probably remember I purchased CNQ.TO at $15/share last year. If the stock price grows to $45/share, I will happily take some profits off the table. No regrets.
Total income from option premiums
Altogether I have made $2,500 trading options since April. I originally aimed to make $750 a month in my first year of trading options. It looks like I am doing okay. 🙂
Warren Buffett once said, “never test the depth of the river with both of your feet.” That’s why I’ve only been using simple and conservative options strategies such as selling Puts with very low Delta. But now that I have some experience writing options, I feel like I can take on some more risk.
So moving forward I would like to try selling a LEAP, which is an option that has 1 year or longer to expiration. The premiums can be very attractive, often $1,000 per contract for some stocks. But there’s a lot of downside risk as well. So I have to choose the underlying carefully. 😉
My other investments such as Bitcoin haven’t performed very well lately.
But when things don’t always go the way I want, it’s nice to know I have options. 😎
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Random Useless Fact:
Having the internet at our fingertips is both a blessing and a curse.
Love the transparency on your blog. You remind me of me a few years ago. Just remember when you sell leaps, there are silly tax rules. You have to claim the entire capital gain in the 2021 tax year and if you cover to close in 2022 you have to then submit a tax adjustment in the next to get some money back. https://ca.rbcwealthmanagement.com/documents/29328/29356/Taxation_of_options_transactions_04132018_high.pdf
Thanks for the tip, Andrew. I did not know that about leaps. 🙂 I learned something new today.
One thing that I would like to see is a column for the Stock Price
at the time of the Option Transaction. This would just give an idea of how much
space you are giving yourself between the stock price and strike.
That’s actually a really good idea.
I already record the stock price on the day that I trade the options so I might as well add them to the blog post. From next month I will include that as a column.
Thanks for the helpful suggestion. 👍
While you’re at it please add an additional column indicating the % difference between strike price and stock
Noted. I’ll include that as well. 🙂
Great job on the options premiums. Great job on the roll as well.
Although it’s 6 months out, I also traded a LEAP recently. I’m bullish on steel, so I bought a call and sold a put on CLF at the same strike price. The premium from the put paid for the price of the call.
That’s a neat trade idea. Sounds like you have a good chance to get an overall profit. 🙂
Congrats!
My friends and I were also talking about this as a viable side income project… I wish I had way more time to look into these kinds of projects instead of using my precious time in trading hours to, you know, work for someone else to make them richer.
I know what you mean. There never seems to be enough time in a day, lol. I’m thinking about quitting one of my jobs so I can spend more time learning about more complicated option strategies. 🙂
What do you think of the Stock Yield Enhancement Program provided by Interactive brokers?
I think it’s a fantastic program. I’m not sure if I can use it myself though because I’m constantly borrowing against my stocks and sometimes withdraw cash out of my IB account. But otherwise it’s a great way to make passive income. 🙂
Great post as always. My options knowledge isn’t what it used to be. Isn’t selling a unprotected put the same has doing covered call? Do you find that it actually juices your return or is it just hidden leverage doing the trick?
I think with covered calls you have to have to actually own the underlying, but with naked puts you don’t have to have anything to start selling. I plan to use both leverage and time decay to increase my gains. 🙂
Congrats on increasing your options income. I like your strategy to only trade options on stocks you would own. Thanks for the transparency and for sharing your strategy in such detail. It’s a great way to learn. I’m looking forward to more reports 🙂
I’m looking forward to learn more as I go. It’s a fun process. Thanks for reading. 🙂
How much time do you invest weekly on this? Interested to see what your hourly rate would be per hour 🙂
I spend about 1 to 2 hours a week researching and putting in trades. Many positions I put in don’t get executed and just expire at the end of the day. My estimate would be about $150/hour on average over the last 3 months. 🙂
Very impressive options income Liquid.
I’ll admit that I’m still too lazy to start options trading to boost monthly income. :p
Thanks man. It is quite a steep learning curve, lol. But I think you are already doing so well with dividends and other side hustles. 🙂
You make me feel so bad by not taking advantage of this stream of income. I am going to have to put some time, learn more, then start the new stream of income. Indeed, trading only what I don’t mind owning.
Question. I see you are mostly doing it on US Market. Is Options trading on TSX isn’t a good idea? I hate the USD-CAD conversion and I don’t even own any US stock directly and would rather keep it that way.
Trading on the TSX can be done, but the premiums usually aren’t as high as on US exchanges. So if a company trades on both sides of the border I typically go with the US dollar denominated stock. 🙂 The currency conversion makes it a bit tricky for tax purposes though. I just have to track things carefully.
This is great to see! Love seeing the slow but steady progress month over month. I also like that you took Mr Buffet’s comment of “don’t test the depth of the river with both feet” to heart. I think your furture is looking bright in the world of options, best of luck to you!
Thanks for the kind words. I look forward to learning more about options in the months to come. 🙂