In the latest Options Income Weekly, I discuss last week’s results, recent market action and our latest trade in one of my favorite income stocks, Roku (ROKU).
After a slow start to August, from a closeout perspective, Options Income Blueprint members booked four winners last week, earning $151 in income.
Here’s a quick rundown of last week’s closed trades:
This was our third successful trade on popular TV streaming platform operator Roku since mid-July. Members who sold just one contract each would have earned $101 in cash.
More importantly, the rates of return on our capital have been excellent, with two of the three trades yielding triple-digit annualized returns.
Now, as I said above, Roku is one of my favorite stocks to trade for income. That said, it is incredibly volatile and not necessarily a stock I want to hold for the long term in the current market.
Because of that, I tend to only recommend selling puts that are well out of the money (OTM). For the trades listed above, the strikes we sold were 19%, 13% and 9% OTM, respectively. Yet, due to the volatile nature of the stock, we have still been able to collect large premiums.
For instance, for our latest trade on Roku, we generated $0.53, or $53 per contract, for selling the ROKU Aug Week Two (8/12) 71 Put. Had that option expired worthless, we would have earned a 0.7% return in four days, or 68% annualized.
However, the day after we put on the trade, Walt Disney (DIS) reported a positive earnings surprise thanks to better-than-expected streaming subscriber numbers for its Disney+ service. ROKU rallied on the news, and the premium on the option we sold fell to $0.13.
I recommended members book fast profits, locking in $40 per contract in cash for a 0.6% return on the $7,100 in capital used to secure the trade. But since the trade was open for just two days, our annualized rate of return jumped to 103%.
While a stock like ROKU may seem like an odd fit for a conservative income-generation service like Options Income Blueprint, our recent results show it’s an excellent choice for income investors, provided they are willing to trade it aggressively for short-term cash.
If I were a betting man, I’d say the next Roku trade isn’t too far off.
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