I wrote a covered call on Prospect last Monday.

music selection:  “Let’s Live For Today” — The Grass Roots

Prospect was originally opened as a Buy/Write position.  The covered call expired worthless and I rolled the position forward.  I was able to sell PSEC160520C00007000 for 30 cents a contract.  The trade will be in force 89 days and yields 17.58% annualized.  The position has moved in the money but I expect to collect at least 2 more .08333 dividends before being called away for some bonus yield.  If called away, I will play the other direction with cash secured puts around the 7 strike.

Prospect is a well managed BDC that is currently yielding over 12%.  This one is a great income play by writing options for additional yield.  I expect to be able to play this one for several months.

In other news, The ABBV put I previously reported as having a 11MAR2016 expiry actually expires today (so my broker reports).  I must have fat thumbed something when recording what I had sold.  The put will expire well out of the money.  I consider ABBV a buy up to 58 and will continue to write out of the money puts around 12% annualized yield up to that strike.

Devour your prey raptors!

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Covered Call Prospect Capital Corporation (PSEC)

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7 thoughts on “Covered Call Prospect Capital Corporation (PSEC)

  • March 6, 2016 at 9:23 pm
    Permalink

    Raptor,

    This doesn’t have anything to do with PSEC, but I’m curious about your opinion on an option trade I just did. I own TROW at a cost basis of $72.5. I have been selling $75 calls on it for 6 months or so. I just sold another one:

    TROW APR 15 2016 75.00 CALL for $1.10

    I estimate net of taxes/fees to get %9.6 annualized, plus a good chance of the dividend, giving %12.57 annualized total.

    Darren

    Reply
    • March 6, 2016 at 9:36 pm
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      I like TROW. It is maybe not very defensive if the market tanks and they lose assets under management but for now it is solid. Anytime you can get over 12% annualized, you are doing far better than the long term market average. Only advice would be to consider putting in a mental stop loss for the price you will sell if shares decline too far.

      Reply
      • March 7, 2016 at 2:07 pm
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        Raptor,

        On the stop loss, do you mean on the option or on the underlying? If I use a stop loss on the underlying then I have a possible naked call. I guess I could stop loss on the underlying and put in a limit order just below the call’s strike price (or at my old cost basis).

        Darren

        Reply
        • March 7, 2016 at 2:38 pm
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          Darren,

          You would close the covered call when closing the underlying. If the price has declined, there will be very little premium left on the covered call and you can close it for a small profit.

          Reply
          • March 7, 2016 at 5:31 pm
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            Raptor,

            Ah, that makes sense. Thank you.

            Darren

  • March 7, 2016 at 1:46 pm
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    Hi, FV.

    I am curious as to the formula you are using to derive your annualized return rate. Thanks in advance.

    Reply

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