ASML Options Trade - Shorting $745 Covered Calls for 31st Jan expiry.
Covered Calls
Average position of ASML 0.00%↑ currently is $717.50 stemming from a put I wrote in Dec20.
Jan 31st, $745 call for $24.10 offers an attractive premium imo especially with the double dip of earnings announcements pushing up premiums + recent stock price volatility stemming from the expected maintained interest rate cuts.
$24.10 / $717.50 indicates a 3.3% return for an 18 day period - not too shabby imo.
Further, I don’t believe $ASML’s position as the world’s sole produce of EUV lithography machines will be overcome anytime soon. Yes, geopolitical pressure and US-China sanctions can hurt sales, but those are temporary problems that go away in time and even if they do not - the world Ex-China will still need $ASML’s massively complicated machines.
Long the stock. Short the covered call at $745.
I am comfortable holding if the shares drop and the call expires worthless.
I am comfortable selling at $745 with my average entry at $717.50.
Note - if the ultimate risk I am holding is my ASML 0.00%↑ position being that I’m exposed to equity price swings, the reasonable thing to ask is why not sell ATM covered call options and rip out maximum value while I can to protect my total downside?
I don’t mind giving away a small bit of premium to have a much higher sales price of $745 vs $725. The $20 difference is a $2,000 difference per 100 shares. Not exactly smart to give away $2,000 for a $500-$1,000 of premiums.
Disclaimer: Caveat Emptor. This is not financial advise. You are responsible for what you buy/do/trade.