In May I'd sold a covered call on PFE for debt of 32.50 (expired). I'd also had 1 lot from a year ago at 34.76. (Adjusted cost basis for 2 lots @ 33.63 )
I sold 32/34 Sep strangle for 50c before earnings for break-evens at 31.50 & 34.50. Today's current 1SD range by Sep expiry is 32-35, highlighted orange above.
Possible outcomes:
1) Ideally the stock will rally above 34, with 1 lot called away at 34 for a small 1% gain on the position and theoretical unlimited profit on the second lot.
2) It stays between the 32 & 34 strikes until expiry and collect the full $50 credit. Might not seem like much but by selling these against the stock each quarter could bring in an extra 6% annually. If you're good it can be done twice as often as that!
3) Stock drops > 3% below the put strike and I'm assigned another lot of shares at 32 which averages down my overall cost basis on the stock.
4) The entire market crashes and the stock falls to 0...
I do like the fundamentals of PFE and am willing to make a longer term investment. CFRA gives the stock a current fair value of $33 and Trefis price estimate is $34.60.
The stock currently yields a 3.9% dividend and currently has a free cash flow yield over 6%.
I sold 32/34 Sep strangle for 50c before earnings for break-evens at 31.50 & 34.50. Today's current 1SD range by Sep expiry is 32-35, highlighted orange above.
Possible outcomes:
1) Ideally the stock will rally above 34, with 1 lot called away at 34 for a small 1% gain on the position and theoretical unlimited profit on the second lot.
2) It stays between the 32 & 34 strikes until expiry and collect the full $50 credit. Might not seem like much but by selling these against the stock each quarter could bring in an extra 6% annually. If you're good it can be done twice as often as that!
3) Stock drops > 3% below the put strike and I'm assigned another lot of shares at 32 which averages down my overall cost basis on the stock.
4) The entire market crashes and the stock falls to 0...
I do like the fundamentals of PFE and am willing to make a longer term investment. CFRA gives the stock a current fair value of $33 and Trefis price estimate is $34.60.
The stock currently yields a 3.9% dividend and currently has a free cash flow yield over 6%.
Trade closed: target reached
As the stock fell I closed the cal side early for no fee at 5c and later at the stock rallied again I closed the put for no fee. This reduces my initial credit to only 40 but closed the strangle two weeks early. The question is, what next? The IV Rank on PFE is low here at only 11% and could stay low for the next month until we approach earnings again in October.
Selling two of the 34 October call (40 delta) could bring in another 50c each.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.