January was a busy month for travelling, we left Malaysia early January, stayed in Singapore for a week before hopping on a 16-day South East Asia cruise. This month was definitely an exciting time for my wife and I. However, with all this travel and limited access to wifi and the time difference made trading a little more difficult. As result, I had to change how I viewed certain positions. Instead of watching the stocks to see if there was more movement (up or down). I decided to write covered calls to lock in some premium. Just as a reminder that the swing trading only part of my investment methodology. My portfolio is comprised of primarily of dividend growth stocks. Here’s how I found my investment style.
In January the stock markets started recovering after weeks of negativity. The rebound in stocks allowed me to sell some of my BNS shares that I purchased in November. The charts looked like it could continue moving up but since I averaged in on this additional position, it made sense to sell half of the position. This would allow me to lock in some profit. If the stock continued to move up, I would participate in the gain with my original position. If the stock pulled back, I locked in a profit and could buy back at a lower price. I sold half of my position at 71.51 for a profit of $0.96 per share.
A couple of days later I was in the same position, explained above, with BMO. The stock had bounced enough for me to sell half of the position. The chart pattern looked identical to BNS, there was a good probability for continued upswing but was at a strong resistance. It was hitting up on its 50-day exponential moving average. I ended up selling BMO at $93.20. The profit for this trade was $0.95 per share.
Trade 3 was actually an assignment to a covered call. I wrote some covered calls on ENB in Dec. The calls I wrote was for the Jan expiry with a strike price of $44.00. I purchased ENB via assignment from a put I wrote early Dec. I wrote about that position in my December recap. In addition to premiums I collected for writing the put and call, I made a $1.00 profit per share. This stock was definitely good to me.
On January 16 I knew I would be hoping on a cruise and would have no access to wifi (except on certain port of calls). As a result, I didn’t want to risk a sharp pull back on these stocks without locking in some profit. The stock looked like it could run more but there was no way to manage the downside. I ended up writing a covered call on BNS. The security was trading just below $72. I wrote the at the money call ($72 strike) with a Feb expiry for a premium of $1.29 per contract.
On January 16, I also wrote some covered calls on BMO. The security was just above $94. Again, I wrote the at the money call ($94 strike) with a Feb expiry for a premium of $1.61 per contract.
This was an assignment on BMO. The option holder ended up exercising his contracts early because they were in the money and the security was about to pay a dividend. Aside from the premium I collected writing the calls above, I ended up making a small profit of $0.08 per share on this assignment.
Dividend received – Due to the timing of my BNS trades I ended up being the record holder of BNS when the dividends were declared. I ended up receiving $0.85 per share for this trade. The BNS trade was pretty profitable for me.
January ended up being a pretty good month even without access to wifi and trading the way I normally would have. I exceeded my monthly target with really only half a month of trading and option writing. I probably could’ve made a little more since both BNS and BMO were higher. However, with the travel, limited wifi on the cruise and the time difference with the North American stock market it would be impossible to properly manage these positions. There is definitely no regrets on the covered call.
The last couple of days have shown some weakness in the markets. There is concern that China and the US will not reach a deal by the deadline. There is also concern regarding the Brexit deal or lack thereof. If this weakness continues there could be more swing trade and options writing opportunities. Personally, I’m hoping for a good pull back. With that said, I hope I will be able to take advantage of this opportunity since I will be hoping on another 16-day cruise (again limited wifi). Fingers crossed!!!