Should I Sell a Call Option on AAL?

Our first experiment is over with selling a call option.  We made money!! “Do a little dance, make a little love, get down tonight” (KC & The Sunshine Band, Get Down Tonight).  I do not know if it is beginner luck or skill, but a win is a win.  “Better than a sharp stick in the eye” (James Williams).  Our call option is going to expire tomorrow, and we bought it for a profit.  Let’s talk about what we did and should I sell a call option on AAL?

The Sky
The Sky

Why We Originally Bought the Stock

We originally bought American Airlines (AAL) because we want to own this stock for it potential to become a great dividend payer.  Plus, with all the cash they are making, the stock should appreciate.  Even though oil might continue to go higher, the slowly improving economy will continue to help out the airline stocks.  We did not want to own a stock or sell call options against a stock we do not like or do not want to own.  You can read our original post of buying American Airlines (AAL) here.

On 1/5/17, we bought 100 shares of American Airlines (AAL) at $46.67.  Next, we sold a Jan-2017 call option at a $47 strike price for $111.95, which would expire in 2 weeks.  We sold the call option to generate some money from the stock while we wait for the future.

My Call Option is Expiring

My call option is going to expire tomorrow.  We bought it back for $75.04.  This comes to a profit of $36.91.  On an original stock purchase price of $4,667.46, we made 0.8% profit in 2 weeks.  If we could do that every week, we would make over 20% per year.  In addition, American Airlines (AAL) stock price has increased in value by a little bit to $47.63.


Should I Sell a Call Option on AAL?

Since we bought back our call option, we have 3 choices

  1. Sell the stock. We want to own the stock, so we will not be doing this today.
  2. Do nothing.
  3. Sell another call option.

On 1/19/2017, we decided to sell a Jan-27-17 call at a strike price of $47.50 this time.  This call will expire in only 1 week.  We received $118.95 for selling this option.  If this expires worthless in 1 weeks, this will generate a 2.5% yield at the current stock value.

Should I sell a call option on AAL and roll this option contract over?  Please feel free to share in the comment section below.

View more stock purchases continue with our journey.

Disclosure: AAL – We own shares and sold a call options

 

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4 thoughts on “Should I Sell a Call Option on AAL?

  1. Hey, a win is a win! It really depends on your portfolio and how you see this fitting in with it. I already have an airline stock so I try to avoid transportation stocks for now until my portfolio is a lot larger.

  2. Love this article. I’m new to the site. I’ve been reading and thinking about covered calls for a long time but never had the confidence to pull the trigger. That being said, do you have any recommendations on a great place to go to learn how to do covered calls?

    1. Thank you and welcome to the site. We are glad to have you. I have just started writing covered calls, so I am still learning. I type “cover call writing strategy” into search engines to learn how to do it. I do not have a specific place where I do my research yet. That is why I am starting small. Small mistakes will only result in small loses if I make a mistake.
      Thank you,
      DM

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