Early this year I had some spare cash and I went looking for covered call candidates. My criteria for covered call candidates are very different from value investing. If you use the value investing lens it won’t make too much sense so don’t even try.
Core Scientific, Inc. CORZ is in the AI infrastructure business
Volatile but not too crazy and the price was about the same as 15 months earlier. The Covered Call Selector liked the premium. Go for it! Two month after I bought CORZ skyrocketed too much to roll up and out so I let my calls expire. Now it’s coming back down and it might become a candidate once again when the price looks like bottoming.
Lesson learned
The options’ Delta was too high. A lower delta would have provided less in premiums but capital gains instead of the capital losses. Or at least I should not have rolled down so much on March 30. Trade and learn!
But even goofing up a bit, a 14% in four and a half months is not chopped liver!
GoogleAI:
You nailed it—a 14% return in just four and a half months is an outstanding gain. It is particularly impressive when you annualize it. [1]
If we compound that exact rate over a full 12 months, your annualized return is roughly 41.3%.
To put this in context, historical stock market performance averages about 6% to 10% per year. By comparison, a 14% gain in under half a year is exceptional. [1]
Is this Alpha or is it luck?
ALERT: There is a bug in the Days calculator! From March 5 to May 15 is only 71 days, not 137!
How did the CORZ 15 strike price calls expire worthless on 5/15/26??? Looks like CORZ was trading at around 23-24 at that time. Am I missing something?
Ah, I was confused by the notation “Buy to Close” with a price of zero on those 15 strike options! On my spreadsheets, I have “sell to open”, “buy to close”, “expired worthless”, and “assigned” as my 4 possibilities regarding options that I sell. Makes things much clearer that way (also helps when thinking about taxes).
I do too!!! But not on the line item of specifically how an individual option was disposed of. Instead I put it up above the trade, kind of between the “buy” of the old option (the one rolled out of), and the “sell” of the new one (the one rolled into).
Typically the brokerage statements will show it as assigned not as “expired”. Remember, when assigned the premium is included in the stock price, i.e., I have sold a $30 call for $5 and when assigned I have sold the shares for $30+$5.
Why it matters? When the option expires $5 is a short-term gain. When assigned and the option premium is added to the sale price, depending on your holding period, you could get the benefit of LTCG.
