On February 3, 2023, we bought an additional 2 shares of Amazon (NASDAQ: AMZN) stock, paying $107.5 per share for our Partnership Fund.
We are now holding 17 shares of AMZN in our Partnership Fund portfolio
Using dollar-cost averaging our average cost per AMZN share is $106.17
83 shares to go once we will be able to start selling covered calls and generate extra income from AMZN stock. We are looking to get there by April / May 2023 using a margin account.
If we had 100 shares of AMZN today, we could sell March 10, 2023, covered call (35 days to expiry) with a strike price of $120, to get a $1.35 premium. In case our shares would get called away on expiry we would realize $1,518 in income in about 35 days, that's a potential return of 14.29%
If our options would expire worthlessly, we would pocket $135 or about 1.27% potential return in about 35 days, and start over by writing additional call options.
Another option I'm looking at right now - selling bear call spreads.
For example, we could sell the same March 10, 2023 call option with a strike price of $120, to get a $1.20 premium and also buy a $125 call option paying $0.7, that would leave us $0.5 credit and a $5 wide credit spread.
In case AMZN would rise to $120 or above at the expiry, we would risk our shares being called away, but as we have only 17 AMZN shares we would have to buy missing shares paying the market price.
For example with AMZN expiring at $125 (our max loss) we would be left with:
100*120-17*106.7+83*125=-$188.9
Our max risk would be $188.9 to earn 50$. I assume this is a risk worth taking, as in the case of a sudden stock price rally close to $120, we would try to roll up and forward this position trying to avoid an assignment.
At the time of writting Amazon stock for a brief moment break above its MA 200, indicating a possible bull run, but slid under its MA 200. There is great chance Amazon will break above the resistance level, and in such case it wouldn't be wise selling naked call options.
We will keep observing market before taking decisson of selling credit spreads on Amazon stock. 17 shares still feel bit too low, much safer area would feel above 50-80 shares.
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