On February 23, 2024, I bought 102 shares with BAC stock paying $33.86 per share and simultaneously sold 1, in the money ,covered call on these shares with a strike price of $33 with expiry set on April 5, 2024. Credit received $150 (before commissions)
As BAC is set to going ex-dividend on February 29, I will try to capture the dividend also. The dividend is $0.24 and will be paid out in March.
When entering this trade my goal is to let shares getting called away, before dividend ex day, thus profiting from increased implied volatility. Additionally adding 2 shares to our long term dividend stock portfolio
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.
The Bank of America Corporation is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina, with investment banking and auxiliary headquarters in Manhattan. The bank was founded in San Francisco, California.
here is the trade setup:
- BOT 102 BAC Stock 33.87 USD
- SLD 1 BAC APR 05 '24 33 Call Option 1.5 USD
What happens next?
On the expiry date, April 05, 2024, BAC is trading under $33 per share - options expire worthlessly and I keep premium - if BAC trades above $33 on the expiry date, my 100 shares will get called away and I realize my max profit of $63 or potential 1.9% yield in 42 days.
If the shares will get called after dividend ex-date I will additionally collect a dividend of $20. Boosting total income to $83 or 2.5% yield in 42 days.
Break-even price: 33.87-1.5= $32.37