Put option trade on Boeing
This morning I opened an option trade on Boeing (BA). I sold-to-open a put with a strike price of 115 and an expiration date of January 20, 2017.
What this means is that should BA be at or below 115 between now and January 20, 2017, I may be assigned to buy 100 shares at $115 per share. BA is currently trading near 120, which is just $5 higher than its 52-week low.
I received $1,169.97 in premium for selling this put and the money was deposited immediately into my account.
If BA stays above 115 by next January, I’d get to keep the entire premium and have made a 10.17% return (since $11,500 is held as a cash-reserve). If BA drops below 115 then I get to keep the premium but then am forced to buy 100 shares at 115. However, since I collected the premium, my break even point is actually 103.3.
If BA were theoretically to drop to 105, I’d still have come out ahead and then would own BA at a great entry point and begin collecting a dividend that is currently up to 3.7%.
This coming year I hope to use this kind of a strategy more often to supplement the dividend income. With the single option trade above I’m higher than the total option income generated in 2015!