Very late in the week, the price pushed up above $34, I was unable to make a market in the position, and the option was exercised, giving me 500 shares of CVS bought at $34.14.
The premium on the iron condor was 90 cents, so my basis for the stock is $33.24.
What to do? Clearly, 500 shares of CVS is more exposure than I want to have to this company. I mean, a good, aggressive pharmacy -- I used them when I lived in Washington, D.C. -- and I use their Caremark mail pharmacy service even today after moving to the Pacific Northwest.
Their financials and analyst ratings are not bad at all. If the stock sold for a lower price, then I would have considered it in my covered call scan last weekend.
It's clear that 500 shares is more exposure than I want to have in any single company. So I shall sell 400 shares in very short order.
For the remaining 100 shares, I can either sell them, or hold on to them for 25 days and sell a covered call against them for a premium of 86 cents or so.
The trend is up, so that makes them a decent covered call candidate from a technical standpoint. The 86 cents would lower my basis further to $32.38, below the present support level.
The return would be 2.6% if exercised, 4.9% if expired. Below my usual 5% guideline.
I haven't made a decision yet. I'm leaning toward selling, based on the low return and the high exposure. I mean, $3,414 is double or triple the usual exposure I take for covered calls.
Today looks like an uptrend retrenchment, so barring a surprise I'll stand pat today and revisit the issue on Tuesday.
No comments:
Post a Comment