DGI Adventure 11-13-16 Sold Covered Call – Target Corporation (TGT) – $74.00 Strike – Dec 09 Expiration

About a month ago I sold a cash secured put against TGT shares that expired on 11/04/16.

The share price closed at $66.53, which means that I got assigned 100 shares for $67/ea.

Then on 11/07/16, the FBI said Hillary had been a good girl, and the market rallied because she was a shoe-in to win the presidency. TGT shares closed at $67.53.

Then on 11/09/16, after the US surprisingly elected a misogynist, racist, protectionist, moronic asshole instead, the market continued to rally for some reason. TGT shares closed at $68.81.

It kept going, and closed on Friday at $71.35.

Seriously, look at this chart:

TGT – 5 Day Chart – Courtesy Google Finance

That is a 6.5% capital gain over my cost basis in 1 week (337.6% annualized).

That is retarded.

So on Friday I sold a covered call that expires on 12/09/16 and has a $74.00 strike price. I sold the contract for $0.70/share and paid a $0.79 commission, so the net premium was $69.21. If I use the $7,400 as the denominator, since that is the equity that’s “at risk”, the premium equates to a 0.935% absolute return. The trade will be in force for 28 days, so that works out to 12.19% annualized.

Bear in mind, though, that is just the profit on the covered call.

TGT goes ex-div tomorrow, and since the contract closed comfortably out of the money on Friday, it shouldn’t get assigned over the weekend. That means I will collect the $0.60/share dividend distribution on 12/10/16, and if I do get assigned, I will have gained $7/share in capital appreciation ($74 strike – $67 cost basis).

My maximum profit for this trade then is $69.21 (covered call premium) + $60.00 (dividend) + $700 (capital gains) = $829.21, which is a 12.4% absolute return in 35 days (11/4 – 12/9), which works out to a very nice 129.3% annualized.

Small consolation for the fact that America might be broken…but I guess I’ll take it.

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