Last Week’s Income Report:
April 19, 2021
The S&P 500 ended last week on a high note, hitting a new record on Friday. The market strength reflected a solid start to the latest earnings season and upbeat economic data.
At Options Income Blueprint, we closed four more successful trades last week, earning $433 in income.
This brings our April total up to nine winners and $1,057 in cash generated at just halfway through the month.
That puts April on track to rival our most profitable month of 2021 so far — January, in which we earned $1,587 from our closed trades.
I want to look at one of last week’s closeouts in a bit more detail, because it contains a valuable lesson about patience.
While the Chewy, Intel and CVS Health positions were put selling trades, Twitter was a buy-write, also known as a covered call.
The vast majority of Options Income Blueprint trades are put sales, but I occasionally recommend a buy-write when there is an opportunity that’s too good to pass up. A buy-write involves buying shares of a particular stock and subsequently selling a call against them to bring in income.
On Feb. 16, I recommended members buy 100 shares of Twitter at $74.47 and sell a TWTR Feb Week Four (2/26) 75 Call for around $3.
The income we generated from the call sale immediately reduced our cost basis on the shares to $71.47.
Things looked promising out of the gate, as TWTR ran up. On Feb. 25, one day before our call was set to expire, the stock was trading well above the 75 strike price of the call we sold.
So, I recommended members roll the call up to the 76 strike and out one week to the March 5 expiration to capture more potential appreciation. We collected an additional $0.30 in premium for rolling the call, lowering our cost basis to $71.17.
Unfortunaletly, shares topped out shortly therafter and the stock turned sharply lower along with the broader tech sector.
With expiration nearing and the stock trading well below our new strike, I recommended members roll to the TWTR Mar Week Two (3/12) 71 Call for around $1.60. This reduced our appreciation potential but also lowered our cost basis significantly to $69.57 per share.
As the stock struggled throughout the month of March, we continued to roll our call for more income to lower our cost basis on shares.
In total, we rolled the position seven times over a two-month period, reducing our cost basis to $65.83.
Our active trade management was well rewarded. On Friday, our TWTR shares we called away at $68. We earned a profit of $2.17, or $217 per 100 shares. That works out to a 2.9% rate of return in 60 days over our initial cost to purchase shares, or 18% on an annualized basis. Not bad for a position that was deep underwater less than a month ago!
My point is that it pays to be patient. I refuse to take a loss on position when I can manage my way to breakeven or profitability. And so should you!