Disney Homework Wrap-up
Disney Homework Wrap-up:

My DIS covered call on 3 contracts (300 shares) was exercised on
August 18 at a Strike price of $50.

Gross Premium: $138
Stock purchased Sept. 28, 2011: $9,390 ($31.30 share)
Sold August 18 - gross profit: $15,000 ($50 share) minus $9,390 =
Total gross profit on sale of shares and premium collected = $5748

The stock closed at 4pm on Friday, Aug. 17 at $50.47 - if I would have
just sold it on that day without doing an option, it would have sold
for $15,141 - only $3 more than stock & premium combined. But I would
have paid only 1 commission instead of one for the option and one when
the stock was called away. In reality, I would have waited for a
higher premium to make it more worthwhile. Since I didn't go very
"out of the money," I might have just waited to sell my stock at a
higher price. However, having sold the option, if the stock price had
fallen I would have kept the premium, still had my stock, and could
continue to sell covered calls until eventually called away.

Theresa & Eric's combined homework thoughts

Previous Disney homework info:

A. What premium sold for: .46 (Strike price at $50)
B. What Expiration date: August 18
C. On what day did I SELL: Thursday, August 9
D. What DIS Price: $49.97 (price of stock at time of SELL)
E. APR: 35%

When looking at today's numbers, I didn't feel that DIS was a good
candidate for a covered call since there were no great "out of the
money" premiums. The stock hovered around $50 all day (in or near the
money) and the next strike price was $55, with basically no premiums.
After looking at & doing some research on DIS
"Headlines," I decided that the stock may not be a great covered call
possibility for the week. If I were using "real money," I would not
place a covered call on DIS. However, for the homework, I decided to
wait for the stock to go under $50 today (out of/near the money) which
it did at the very end of the day. I placed the option then because I
figured the premiums would drop each day as it neared August 18. The
APR was higher for the front month - 35% (lower premium) and was 20%
for the second month (but with higher premium).