No. of Recommendations: 3
First step is gathering up all the correct numbers.Agreed! But I think your numbers would be more correct as follows...
Buy stock, sell call:
Buy share at 470 -470
Sell 500 call at 25 25
Deliver stock in June '26 500
NET GAIN 55
PERCENT GAIN = 55 / 445 = 12.36%
Sell cash covered put:
Sell 500 put at 39 39
Retain 500 secured cash
Interest on 500 @ 4.2% (10/12) 17.50
Put expires worthless in June '26
NET GAIN 56.50
PERCENT GAIN = 56.50 / 461 = 12.26%
The adjustments I made are:
1. There's no interest penalty on the buy-write. It's not costing you any interest, you just aren't making interest. So interest is a zero, not -15.58. That raises the gain and ROI % accordingly.
2. On the put write, you need to put up $461 of your own money, plus the $39 premium, to secure the put. So you're earning interest on that $500 commitment, not $539. This reduces the interest to $17.50 and the net gain to $56.50.
You're left with a .1% difference between the two trade ideas... basically in the noise of a bid/ask spread.
Rob
