Another short term income trade - ITM CC FSLR

Today, I entered another short term ITM covered call for FSLR.

FSLR is volatile stock and is great for trading. It has been beaten down in the month of Nov.

Fundamentally, I am not a fan of FSLR. I believe its operating margins are under pressure and its technology is losing its edge compared to the competitors.

But the stock has been greatly oversold. On end of November it formed a base and issued a positive signal yesterday. Today, the positive signal is confirmed.

I do not want to be over optimistic. The rise of the stock is also driven by the bullish reversal of the overall market the last 2 days. This rally has the potential to go on for another 2-3 weeks until options expiry date.

For this trade, I initiated an ITM covered call:

Buy shares of FSLR at 129.15
STO Dec 125 SC   at 7.2
Cost : 121.95
Extrinsic value = 3.05 or which gives me a 2.4% ROI for 15 days which gives me an annual ROI of >57%

It is a safe short term trade yet with high return. Like ISRG, I am deploying the spare cash I have in my account.

Do not despise these 2-3% gains per month. It adds up nicely every month. Normally, I do a lot of these trades in the last 3 weeks of expiration of the month when the theta decay accelerates. 

PE: Let the shares be called out by expiration. As long as the stock stays above 125 by expiration, I will be making money.

SE: If the stock falls below 122, I may add a SP or adjust the call down or just close the trade for a small loss. It all depends on the price actions and the overall market trend over the next 15 days.

Normally,if it goes down violently I will most probably add a put to collar it and continue to add SC until the trade makes money. But there are times, that I may just close the trade because I know fundamentally it has broken down.

If the stock falls without fundamental break down or the market turns bearish before Dec expiration, I will be forced either to roll the SC down first and then add a protective put.