Assigned AAPL Call, Purchase of JNJ and HXL
On 1/25/2017 I sold a call on AAPL with a strike of 125 when the stock was trading at 121.95. The expiration date was 2/24/2017. For selling this I received $105.99 after commission.
I’m using the past tense above because I had an investing first for me. On the evening of 2/8/2017 I received a notification from my Schwab app that my call had been assigned and I had just sold 100 shares of AAPL at $125/share. AAPL was trading at around $130 at the time so I was missing out on approximately $500 extra that I could have made selling on the open market. That’s one of the risks you take by selling options and the reason why you’re able to collect a premium.
I’ve had assignments before but this was the first early assignment. American options (compared with European style options) do have the ability to get assigned early anytime they are in the money.
Most of the time the option wouldn’t get assigned until the expiration date, but in this case it seemed that someone wanted to get those shares so that he could receive the upcoming dividend.
With the extra $12,500 now in cash available to trade I didn’t wait long. Here are the dividend purchases I made:
Johnson & Johnson (JNJ): $7100 invested. Increases annual dividend by $198.40.
Hexcel Corporation (HXL): $3900 invested. Increases annual dividend by $33.
Everyone knows JNJ. With this purchase JNJ becomes my second largest single investment at 7.54% of my portfolio. Even though JNJ may be a little higher priced now, I’m in this game for the long run.
Hexcel Corporation, I’m betting, is new to everyone here. It is a play on the huge backlog of orders that Boeing and Airbus have for their new planes. Hexcel makes the majority of the carbon fiber material used on the latest planes and stands to have huge growth over the next few years because if it. It also pays a small 0.84% dividend that is well covered. This purchase isn’t specifically for the dividends, but that is a nice added bonus!
Altogether, these purchases bring my forward annual dividends up to $6,198.45.