The Trade at a Glance
- Underlying Stock: BILL Holdings Inc. ($BILL)
- Strategy: Sell 1 Covered Call
- Expiration: January 2026
- Strike Price: $100
- Premium Received: $80
- Shares Held: 100 shares of $BILL
- Base Cost of Shares: $96.45/share
Key Metrics
- Max Profit: $435 ($3.55 stock appreciation + $0.80 premium per share, assuming assignment at $100).
- Break-Even Price: $95.65 ($96.45 base cost – $0.80 premium).
- Risk: Limited upside if $BILL rises above $100 before Jan 2026.
Why This Trade Makes Sense
Income Generation
Covered calls offer premium income, boosting returns over time, especially with a long-dated option like this one.
Long-Term Hold Strategy
By choosing a 2026 expiration, you lock in long-term yield and have time for the stock to appreciate toward the strike.
Cost Basis Reduction
The $80 premium reduces the effective cost basis, helping cushion short-term volatility.
Risk Management
- Max Loss Scenario: If $BILL declines significantly, losses are offset only slightly by the premium received.
- Mitigation Strategies:
- Roll or close the call when it makes sense, especially if price action or fundamentals change.
- Only trade if comfortable selling $BILL at $100 by Jan 2026.
Final Thoughts
Covered calls are a core income strategy for long-term investors. For a $100K account, this $BILL trade combines conservative income generation with defined exit parameters.
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Disclaimer: This post is for educational purposes only. Past performance does not guarantee future results. Options trading involves significant risk.
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