CVX and NKE Covered Calls Update

In recent articles (here and here) I disclosed that I had written covered calls on Chevron Corporation (CVX) and Nike, Inc. (NKE) in an effort to merely skim additional income.

The NKE covered calls are working out so far but they expire March 19th and anything can happen between now and expiry (especially in this market environment). For now, these option contracts are profitable and I am happy to leave these option contracts in place.

The CVX covered call contracts...different story. The deep freeze in the US has contributed to a surge in oil and gas prices and investors appear to be rotating into what was a depressed sector. When I saw what was happening with CVX's share price and came to the realization that CVX's share price would likely rise above the $100 strike price of my option contracts I decided to close my position. Although CVX's share price could drop between now and expiry I am a long-term CVX shareholder and I did not want to risk having my shares called away prior to expiry; having my shares called away would trigger undesired tax implications.

I have incurred a slight loss on the CVX contracts but this loss is mostly offset by the NKE and CVX option premiums I collected and the dividend income I shall receive on March 10th from the 1100 CVX shares (11 option contracts).

Final Thoughts

A loss is a loss no matter how I look at it. Sometimes my covered calls work out and others times they do not. In the case of CVX I did not get the desired outcome.

On the bright side, I learned more about my investment style. As a long-term investor I look at the share price of the securities I own, at the most, a couple of times a day. About two weeks after I wrote the CVX covered calls I started to look at CVX's share price several times a day; I have paid little attention to NKE because on the rare occasion I have checked the share price I see that it has perfomed as I had hoped (stay relatively steady or decline).

Every investor is different so my 'buy and hold pretty much forever' investment style certainly will not appeal to everyone. Having said this, while the COVID pandemic has significantly negatively  impacted the extent to which I used to be physically active, my life has not become so desperate that I need to watch minute by minute stock price gyrations.

I have accepted my nominal CVX loss and have moved on.

I wish you much success on your journey to financial freedom.

Thanks for reading!

Note: I sincerely appreciate the time you took to read this article. Please send any feedback, corrections, or questions to [email protected].

Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.

Disclosure: I am long CVX and NKE.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.