Trading Weekly Options on Canada Goose Holdings Inc (GOOS.TO)
Just as a follow up to our block trade on Canada Goose Holdings Inc (GOOS) from November 14, 2019, the January 17, 2020 $46 strike call options have expired worthless, since the stock traded out-of-the money at market close.
Effectively, we have captured the full option premium of $4.31/share and our cost is now reduced to $42.19/share. The trade mechanics are below:
Table—Expiration of January $46 strike calls for trade placed on November 13th, 2019 at CIBC Private Wealth
| Bought 10000 Shares of GOOS | @ $46.50 |
| Sold 100 Jan 2020 $46 calls (expired) | @ $4.31 |
| Our net cost (Net Debit) | $42.19/share CAD |
Now that there is no option covering the stock, we have decided to take advantage of weekly option premium, by selling calls for January 24, 2020 at $45 strike price. For this option series, we have collected $0.8695/share on January 20th. This represents 1.93% call away return in only 5 days, based on closing price of $45 last business day.
This allows us to further chip our cost down to $41.3205/share from our original purchase at $46.50/share on November 13, 2019. In just 10 weeks, we have captured income from options of $5.1795/share, which is 11.14% (=5.1795/46.50).
Conclusion
As active traders, our objective is to use Covered call strategy to generate alpha from option premium and to reduce portfolio risk. For 20 years, our team at CIBC Private Wealth has used defensive option strategies including Covered Calls, Selling Covered Puts and Collars to manage client portfolios. Even if stocks go down, we can roll out the options (sell additional time) to reduce our cost further. Protecting portfolio downside is important especially during a current technical outlook, which suggests that markets are overbought.[1]
As discretionary Portfolio Managers, we trade both stocks and options in bulk to get the finest pricing (net debit), and allocate to our clients based on client risk profile and cash balances available in their account.
Disclaimer
The material in this report comes from the personal/computer calculations of Avin Mehra and Ankit Mehra. In the event of a discrepancy between the data used in this report and the data generated by CIBC Wood Gundy, reliance must be placed on the data generated through the facilities of CIBC Wood Gundy.
Options involve risk and are not suitable for all investors. Investors should be aware of tax considerations, margin requirements, commissions and other transaction costs, as they may significantly affect the economic consequences of any option transaction strategy and should be reviewed carefully with your Investment Advisor and personal tax advisor before the strategy is undertaken.
[1] SOURCE – https://money.cnn.com/data/fear-and-greed/
Avin Mehra is a Vice President and Portfolio Manager at CIBC Private Wealth and principal of Mehra Wealth Management. He has over 45 years of experience in the financial services sector. Before CIBC, he worked in several mid-level and senior positions with Indian and overseas banks in five different countries, before joining Merrill Lynch in May 2000 and transitioning to CIBC Wood Gundy in the year 2001. Avin manages accounts on a discretionary basis using defensive option strategies (namely covered call writing, selling cash covered puts, and collars). Capital preservation is of paramount importance and the team educates investors on how to protect the portfolio downside while generating a stable income stream from their investments. Mehra Wealth Management practice is fee-based, where clients pay a fixed percentage fee, but have access to unlimited trades in North American equities and options with zero trading cost. The team actively hosts monthly seminars on a diverse range of financial topics including Options Strategies, Taxation, Retirement Planning, Wills and Estate Planning, North American Stock Markets etc. Avin has been actively involved with the Montreal Exchange in educating Retail Investors and Portfolio Managers on using options as defensive tools. Avin won the 2019 Award for Best Active Manager in Exchange Traded Derivatives sponsored by the TMX Group, at the Wealth Professional Annual Gala. Avin was also part of the All Stars of Option Trading stream at the Annual Toronto MoneyShow on September 21, 2019. He presented on Covered Calls and Other Defensive option strategies. Avin is supported by his son, Ankit Mehra, a CFA Charterholder and Associate Investment Advisor. Ankit is enrolled in the accelerated MBA program (part-time) at the Schulich School of Business. Ankit assists his team with stock selection, research. portfolio rebalancing, team branding and options trading. For more information about the team, visit www.mehra.ca.
The information provided on this website, including financial and economic data, quotes and any analysis or interpretation thereof, is provided solely for information purposes and shall not be construed in any jurisdiction as providing any advice or recommendation with respect to the purchase or sale of any derivative instrument, underlying security or any other financial instrument or as providing legal, accounting, tax, financial or investment advice. Bourse de Montréal Inc. recommends that you consult your own advisors in accordance with your needs before making decision to take into account your particular investment objectives, financial situation and individual needs.
All references on this website to specifications, rules and obligations concerning a product are subject to the rules, policies and procedures of Bourse de Montréal Inc. and its clearinghouse, the Canadian Derivatives Clearing Corporation, which prevail over the content of this website. Although care has been taken in the preparation of the documents published on this website, Bourse de Montréal Inc. and/or its affiliates do not guarantee the accuracy or completeness of the information published on this website and reserve the right to amend or review, at any time and without prior notice, the content of these documents. Neither Bourse de Montréal Inc. nor any of its affiliates, directors, officers, employees or agents shall be liable for any damages, losses or costs incurred as a result of any errors or omissions on this website or of the use of or reliance upon any information appearing on this website.
BAX®, CADC®, CGB®, CGF®, CGZ®, LGB®, MX®, OBX®, OGB®, OIS-MX®, ONX®, SCF®, SXA®, SXB®, SXF®, SXH®, SXM®, SXO®, SXY®, and USX® are registered trademarks of the Bourse. OBW™, OBY™, OBZ™, SXK™, SXJ™, SXU™, SXV™, Montréal Exchange and the Montréal Exchange logo are trademarks of the Bourse. All other trademarks used are the property of their respective owners.
© 2024 Bourse de Montréal Inc. All Rights Reserved.