GPS – Covered Call – 8.37% potential return in 7 days

Updated: 4 June, 2020 seen 91

On May 1, 2020, I bought 110 shares of GPS, paying $7.585 per share. GPS is the ticker name of the Gap, Inc., commonly known as Gap Inc. or Gap, an American worldwide clothing and accessories retailer.​

GPS has been on my radar since the end of the March when I sold a ratio back spreads on it in the hopes of an explosion in price, to make me a quick buck. As the explosion didn't happen and my ratio back spread contracts come to maturity  in May I decided to take a little risk and buy some shares to sell a covered call against them.

Here is the setup:

  • BOT 110 GPS Stock 7.585 USD
  • SLD 1 GPS MAY 08 '20 8 Call Option 0.22 USD

Potential income return 8.37% in 7 days
Break-even: $7.365

If the stock will trade above $8.00 on the expiry day - very well, I realize my max gain, 100 shares get called away. I keep 10 shares for memory or seed for the future buys

If trades in between $7.365-$8.00, this option contract expires worthless and I keep selling more covered calls

If trades below $7.365 - my max loss, in such a scenario I will most probably double up to lower the cost basis and keep selling more covered calls.

Selling covered calls with GPS

Selling covered calls with GPS