Optimism that the debt ceiling crisis will be resolved soon is driving the market higher today. Even with fear in the market earlier this week, option volatility remains flat with the VIX down at 18 again. That means out of the money option premiums are slim around the stock price unless a company has earnings coming up or is a “mo-mo” stock in the AI business.
This makes it a challenge to manage call options around some of the stocks we own. However, with stock prices moving higher, we can make some adjustments to boost income.
TRADE ROLL
Cardinal Health (CAH): 84.30
Cardinal Health stock price continues to shine. Their business model is churning out plenty of free cash flow and the company currently appears to be recession proof. We will continue to roll our puts out on CAH and collect more premium.
ACTION: Roll the CAH 26 May 85 put to the 9 Jun 85 put for a net credit of around 1.20 to 1.25
Buy to close CAH 26 May 85 put
Sell to open CAH 9 Jun 85 put
Camping World (CWH):
The forecasts and analysis around Camping World are still fixated on a potential slowdown of RV only sales. Camping World has evolved beyond vehicle sales into service, camping products, finance, and insurance for the recreational field and much more. Travel season has picked up and RV sales are holding steady. And the rumor that CWH was planning to cut its dividend doesn’t hold. The company announced a 0.625/share dividend (in line with previous) with an ex-dividend date on 6/13 and payment on 6/29.
Unfortunately, the stock price has run beyond our call 24 May call. We will let our shares be called out but there is plenty of premium to collect selling puts ahead of the ex-dividend date. Look for an alert on Tuesday.
ACTION: No action. Allow CWH shares to be called away.
Dow Inc. (DOW): 50.70
Industrial stocks like DOW came in with decent earnings for the first quarter but are not getting rewarded by Wall Street. The stock has support at $50 and could work its way higher over the next month, but we can’t roll our 54 call down and get a decent credit. DOW goes ex-dividend on Tuesday (5/30) and we will wait for the stock to trade lower, and then sell a new call position on Wednesday or Thursday next week.
ACTION: No action. Allow 26 May 54 call to expire worthless.
COVERED CALL
Gilead Sciences (GILD): 78.22
Gilead stock price is holding and we can still expect it to generate more cash from our call positions in the short-term. The stock goes ex-dividend on 6/14, so let’s sell a covered call for 9 June.
ACTION: Sell to open GILD 9 Jun 80 call for a net credit of around 0.65 to 0.68.