I made a Covered Call trade today for NiSource (NI) during the GameStop market meltdown. Probably not smart adding another Utility, but I am not finding safe value anywhere else in this crazy market.
Just like my FirstEnergy trade, I used the high implied volatility late in the day to make the following trade:
- Bought: 1000 shares of NI at $21.13
- Sold: Ten (10) March 19, 2021 Calls
- Strike Price: $23.00
- *Premium Collected: $380.00
So, my entry price for NI was $20.75. If I am forced to sell the 1000 shares in March 2021 at the $23.00 strike price, my profit will be approx. $2,250.00.
Since my entry price is over a 27% discount to NiSource’s Fair Value of $28.50 per share, I feel this trade provided a comfortable Margin of Safety. NiSource also pays a nice 3.9% dividend that I will start collecting in early February 2021.
*Excludes transaction costs.
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