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PR Covered Call

February 29, 2024
Covered Call: Buy Permian Resources (PR) Stock and Sell the April 15 Call (exp. 4/19) for a Net Price of $14.55 or less.

The Cabot Options Trader portfolio has several “fast balls” in the portfolio right now (HOOD/TSM/CELH/NTNX/PLTR/MRVL). Let’s diversify a bit with a covered call in PR, which looks great, and recently reported strong earnings … though we are going to do so via a covered call that has a slight twist to it (more on that below).

To execute this trade you need to:
Buy PR Stock
Sell to Open the PR April 15 Call

For every 100 shares of PR stock you buy, you can sell 1 call. For every 200 shares of PR stock you buy, you can sell 2 calls. And so on …

The most you can lose on this trade is $1,455 per covered call if PR stock were to go to zero.

The most you can make on this trade is $45 per covered call (a yield of 3.09% in just over one month) if PR stock were to close above 15 on April expiration.

The breakeven on this trade is at 14.55.

Please note, the twist I mentioned above is PR stock goes ex-dividend on March 12, and I would expect, though it is not a guarantee, that we will collect the $0.05 dividend on top of the covered call premium, which bumps up our yield potential a touch more.

Finally, the reason I am selling an in-the-money covered call in PR, is this will give us a bit room to the downside in case the market and/or PR were to fall in the coming month (essentially, the strategy is a defensive covered call).

Position (Original) PR April 15 Covered Call
Position StrategyCovered Call
Opened DateFebruary 29, 2024
ExpirationApril 19, 2024
Net Price14.54
Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.