Market-beating INTC Wheel –
I’ve traded INTC on and off as a wheel trade for many years – in fact it was one of my first option trades with OptionsHouse back in 2012 that I made to earn a Kindle Fire:
Having recently freed up some cash, I decided to sell a cash secured put to try and get assigned, just after their earnings in July.
- 7/31/2019 – Sell 1 8/9/2019 INTC 50 put for 0.36 – underlying was at 51.39
- 0.72% return on risk ($5k) in 9 days
- Stock at 51.39, 2.7% of downside protection
I don’t want to brag, but I couldn’t have timed it much worse. I bought at my usual noon timeframe and the stock dropped further at the end of the day and then continued to drop through my strike price in a trade war induced sell-off.
I achieved my goal and was assigned – early no less – on 8/7/2019.
- 8/8/2019 – sold 1 9/6/2019 51 call for 0.25
- 0.5% return on risk ($5k) for 29 days
- 2.5% return on risk if assigned
Immediate return is less than I’d like; would prefer 1%/month on average. However, combined with the first trade, I’m receiving 1.22% over 37 days with potential upside if called away.
INTC closed at 50.92 on 9/9, basically maximizing my profit without the position being called away. Clearly good timing on my part.
INTC went on a bit of a run higher, so what did I do? Nothing. I was on work travel a lot in September and didn’t put on a trade. A key component of the Option Salary approach is that we’re employed full-time or simply want to avoid watching the market full time to make more room for Netflix. The risk management approaches we take allow for this.
- 9/23/2019 – sold 1 9/27/2019 51 call for 0.45
- 0.9% return on risk for 4 days
- 2.9% return on risk if assigned
INTC closed at 50.78 on 9/27, call expired worthless
- 9/30/2019 – sold 1 10/4/2019 51.5 call for 0.41
- 0.82% return on risk for 4 days, 3.82% if assigned
Able to reach for the 51.5 strike and still get a nice return on risk if not assigned.
Closed for 0.03 on 10/3 after the underlying dropped.
- 10/4/2019 – sold 1 10/11/2019 51 call for 0.40
- 0.8% return on risk for 7 days, 2.8% if assigned
INTC closed at 51.11 on 10/11 and I was assigned.
On $5k of risk, received $184 in premium, plus $100 in capital gains:
$284 total or 5.68% in just 72 days. 28.79% annualized.
Against Buy and Hold:
7/31/2019 – INTC was at 51.39 when I sold the put, 51.11 when I was assigned on 7/11 for a return of -0.54%. If I include the dividend it would have roughly broke even (up 3.5 cents)
7/31/2019 – SPY was at 300.98, 296.28 on 7/11 for a return of -1.56%
I couldn’t have timed my put sale much worse, had to abandon the position for 2 weeks, and still came out well ahead of buying and holding the underlying or the broader market.