On November 23, 2020, we sold 1 covered call on NYSE:PLTR stock with an expiry set in the next 4 days. For this trade, we get a premium of $105 (before commissions).
This trade comes as the #20 in the month of November, according to our trading plan for this month, the premium generated from this trade makes us about 7.8% of our $1000 monthly goal, while in total we have already reached 153.24% so far.
PLTR is one of our favorite stocks to trade credit spreads / covered puts on, since April 2020, this stock has made us the most options income so far.
Here is our trade setup:
- STO 1 PLTR NOV 27 ’20 – 20 Call -1.05 USD
For this trade, we got a premium of 105 USD (after commissions) or a 5.1% potential income return in 4 days.
What happens next?
On expiry date November 27, 2020 PLTR is trading above $20 per share – options expire in the time and we keep premium and our shares are sold for $20 – if PLTR trades under $20 on the expiry date, we keep premium, and our keep our shares.
But as we already have collected a premium of $1.05 per share, our break-even price for this trade then is $20.02(our cost average)- 1.05= $18.97
Because PLTR is trading such on an uptrend we are essentially just using this trade with hopes that PLTR does close above our $20 strike. We would make more money if we just held the shares instead of selling a covered call against them but its about risk management. Once we get exercised and our shares are sold we will reenter $PLTR with selling a put, therefore lowering our cost bias even more!
