We exited our Bank of America (BAC) and Citigroup (C) covered call positions last week to avoid holding through earnings. Both companies delivered results that impressed the Street and the stocks rallied.
I know it’s frustrating to miss out on that run-up and instead be left with large net debits, but things could have just as easily gone the other way, even with the banks delivering solid reports. As you know, we take a conservative approach to income generation, and that does not include speculating on earnings announcements.
Now that earnings are out of the way, let’s get back to generating income by selling puts to reduce our net debits on the positions.
You can enter today’s trades even if you were not in the previous ones. Just be aware that we will be managing and tracking them based on the ongoing positions.
BAC
Current Stock Price: $33.78
Net Debit: $10.45 (The net debit was incorrectly listed as $10.31 in the previous alert.)
Action: Sell to open the BAC Oct Week Four (10/28) 33.50 Put
Current Option Price: $0.68-$0.69
Recommended Limit: Set your initial limit order at $0.68, but adjust as needed to sell a put today
New Net Debit: $9.77
Expiration: After the close on Friday, Oct. 28
Potential Rate of Return: I am targeting breakeven for this position
C
Current Stock Price: $42.98
Net Debit: $23.21 (The net debit was incorrectly listed as $22.91 in the previous alert.)
Action: Sell to open the C Oct Week Four (10/28) 42 Put
Current Option Price: $0.63-$0.67
Recommended Limit: Set your initial limit order at $0.65, but adjust as needed to sell a put today
New Net Debit: $22.65
Expiration: After the close on Friday, Oct. 28
Potential Rate of Return: I am targeting breakeven for this position