26 December how I managed to get low cost in spyg at 84.71 reflection
Strategic SPYG Covered Call Trade – December 26 Update
Understanding the Covered Call Strategy
I currently hold 100 shares of SPYG, with an average price of $87.20. To enhance returns, I sold a covered call at a $91 strike price, earning a $0.99 premium per share. This contract expires on January 17, 2025, giving me the potential to capitalize on both price appreciation and premium income.
Let’s break it down:
• If SPYG closes at or above $91 by expiration, my maximum profit will be:
($91 - $87.20) + $0.99 = $4.79 per share, or $479 total.
• If SPYG stays below $91, the call will expire worthless, and I’ll keep the premium while holding my shares for future growth.
Reducing My Cost Basis
By selling this call, I’ve effectively reduced my cost basis:
• Initial cost basis: $87.20.
• Premium collected from this trade: $0.99.
• Previous premium collected from earlier calls: $1.50.
Thus, my adjusted cost basis is now:
$87.20 - $0.99 - $1.50 = $84.71.
This strategy not only improves profitability but also cushions against potential downside risks.
Technical Analysis of SPYG
• Current Price: SPYG closed at $91.12 (+1.32%) on December 26, 2024.
• Moving Averages: The price is above all key moving averages (MA5: $89.28, MA10: $90.02, MA20: $89.30, MA30: $88.33), signaling strong bullish momentum.
• Bollinger Bands:
• Upper band: $91.56.
• Lower band: $87.62.
SPYG is testing the upper Bollinger Band, suggesting potential resistance. A breakout could signal further upward momentum.
• Dividend Impact: SPYG recently paid a dividend of $0.171357 per share on December 23, 2024, adding consistent income for long-term holders like me.
• Volume and Momentum: With a daily volume of 943.6K shares, SPYG shows healthy liquidity. The RSI appears neutral, implying no immediate overbought or oversold conditions.
Trade Outlook
If SPYG continues to rise, I may let the call get exercised, securing my maximum profit of $479. If not, the premiums collected lower my cost basis further, positioning me for long-term gains. The technicals support a bullish trend, but I’ll keep an eye on resistance at $91.49 and potential retracement to the $89-$90 range.
This trade aligns perfectly with my strategy of leveraging covered calls for consistent income while managing risk effectively. 💼📈
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