It is time to roll expired calls on HSBC and PEP.  Remember, these are both “Diagonal” calls where we are using a purchased call instead of holding the underlying security to increase leverage.

Sell HSBC150619C00047000 for 0.20.  Against a basis on the purchased call of 15.29, that comes out to about 5 and a quarter annualized return.  We also stand to earn approximately three times the annual return on our purchased call at expiry.  Alternatively, sell the purchased call and buy the underlying shares to capture the 9% dividend yield.

Sell PEP150417C00105000 for 0.18.  Against a basis on the purchased call of 17.47, this comes out to 12.36% annualized return.  Like HSBC, we stand to make a leveraged return on our capital at risk as well.

Devour your prey, raptors!

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