I wanted to make another Covered Call trade on FirstEnergy Corp (FE) today since my last one worked out so well, but the Call premium was just not high enough to make the trade work. The Skew was working against me.
Given the Puts had the better premium payout – I decided to sell them instead – here is the trade:
- Sold: Ten (10) May 21, 2021 Puts
- Strike Price: $33.00
- *Premium Collected: $550.00
If I am forced to buy the 1000 shares, my entry price will be $32.45, almost a 23% discount to FirstEnergy’s Fair Value of $42.00 per share. I feel this trade provided a reasonable Margin of Safety.
FirstEnergy also pays an above average 4.46% dividend – that I would unfortunately miss out on in May, since the Ex-Dividend date is May 6th, 2021 and I would be put the shares on May 21st, 2021.
*Excludes transaction costs.
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