Disclaimer: Nothing I say or post should be considered financial advice. Please do your own due diligence before making any investment decisions.
Tencent Music Entertainment (TME) is trading right at $9.18. Because it is a low-priced stock sitting very close to its 52-week lows ($8.44), its options chain is tightly packed in $0.50 and $1.00 increments.
Unlike high-flying tech stocks like SentinelOne, TME has already reported its Q1 earnings, and its implied volatility is relatively low. This means we aren't harvesting massive premium, but we can structure a highly precise, low-risk June 18, 2026 Monthly Expiry play.
Depending on whether you already own the shares at a specific cost basis or are looking to enter a fresh "Buy-Write" package today, here are the three best covered call strategies for the June 18 expiration.
Strategy 1: The "Income Compounder" (The $9.50 Strike)
This is the most well-rounded strategy if you are entering fresh today or have a cost basis around $9.00. It gives you a perfect balance of immediate downside protection and room for the stock to run.
The Strike: June 18 $9.50 Call (Out-of-the-Money)
Estimated Premium: ~$0.25 to $0.30
Net Cost Basis: $8.90 ($9.18 stock - $0.28 premium)
The Math on Expiration:
Downside Buffer: You are protected against a drop of up to 3%.
Max Profit Payout: If TME drifts up to $9.50 or higher by June 18, your shares are called away. You make $0.32 in stock growth ($9.50 - $9.18) plus you keep the $0.28 premium.
Total Return: $0.60 per share ($60 per contract) on a $890 capital risk, giving you a 6.7% raw return in roughly 3 weeks.
Strategy 2: The "High-Yield Fortress" (The $9.00 Strike)
If you are deeply conservative, want to maximize your safety cushion against broader China ADR regulatory volatility, and don't care about stock upside, you go In-the-Money (ITM).
The Strike: June 18 $9.00 Call (In-the-Money)
Estimated Premium: ~$0.55 to $0.60
Net Cost Basis: $8.60 ($9.18 stock - $0.58 premium)
The Math on Expiration:
Downside Buffer: A massive 6.3% cushion. TME can slide all the way down to $9.00, and you still walk away with maximum profit. Your absolute break-even is $8.60.
Max Profit Payout: If the stock finishes anywhere above $9.00, you sell at $9.00. Since your cost basis was $8.60, you clear exactly $0.40 per share ($40 per contract).
Total Return: A 4.6% raw return in 3 weeks. This is a very high-probability win because the stock is already trading safely above your strike.
Strategy 3: The "Growth Lottery Ticket" (The $10.00 Strike)
If you are incredibly bullish on TME's recent multi-billion dollar acquisition of podcast giant Ximalaya, and you think the stock is going to aggressively rebound toward its 200-day moving average ($19.07), you sell the $10 strike.
The Strike: June 18 $10.00 Call (Deep Out-of-the-Money)
Estimated Premium: ~$0.10 (only $10 per contract)
Net Cost Basis: $9.08
The Math on Expiration:
The Catch: You get almost no downside protection ($0.10) and very little premium income.
The Upside: You leave the door wide open for the stock to surge. If it hits $10.00, you make $0.82 in stock appreciation plus the $0.10 premium, netting a 10.1% return.
The Verdict
If you are doing a fresh entry today: Execute the June 18 $9.50 Call package. It gives you the best statistical risk-to-reward ratio for a low-priced equity.
I bought 100 shares of TME @ $9.21 each, and sold a single call option @ $9 strike price for $0.52cr. Here is the ROI breakdown.
1. The Capital Scorecard
Gross Stock Cost: $9.19 per share ($919 total)
Option Premium Collected: -$0.53 per share ($53 total)
Net Capital Outlay (Your True Risk): $8.66 per share ($866 total)
2. Scenario A: The Stock Stays Above $9.00 (Maximum Profit ROI)
If TME finishes anywhere above $9.00 on June 18, your shares will be called away at exactly $9.00.
Your Payout: You keep the $0.53 premium + you receive $9.00 for the shares = $9.53 total return per share.
Net Dollar Profit: $9.53 (Total Return) - $9.19 (Original Stock Cost) = $0.34 per share ($34 total).
Your Raw ROI:3.93%📈
Annualized Return: Making 3.93% in just 22 days equates to an annualized yield of 65.1%.
3. Scenario B: The Stock Stays Exactly Flat at $9.19 (Unassigned ROI)
If the option expires or you buy it back right before expiration with the stock unchanged, your ROI is purely based on the premium buffer.
Your Raw ROI:6.12%.
Note: In this scenario, you would still own the shares, but your unrealized stock loss would be $0, leaving you up a clean 6.12% on the cash premium
4. Your Downside Buffer
Because you collected $0.53, your ultimate break-even point on this entire trade is $8.66. TME can drop by up to 5.77% from your purchase price over the next three weeks, and you will still not lose a single penny on the trade.
@Madluvyz - Specialist in combining FA and TA for options selling and swing trading.[举爪]
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