Introduction (January 2024)
From late 2021 until January 2024, the share price of WIX dropped from the mid $200s to the low $60s, then recovered to the mid $120s. I have actively managed a trade campaign through this big decline and partial recovery, generating options premium along the way, and sharing my thoughts in this blog post.
In spite of the share price still being 50% below my starting point two years ago, I have lowered my breakeven point enough to reach a place of profitability again.
I recently sold 98 shares at a profit to reduce the size of the position, and I'm just trying to generate a little more income before completely letting go of this long and challenging campaign.
Read along for the saga and my thinking at each decision point. And if you would like to learn more about decision points for your own trade management, check out Chapter Six, "Trade Management for the Not so Novice Investor," recently added to The Novice Investor's Guide to Stocks, Funds, and Options.
If you are interested in having your own template of the spreadsheet I use to keep track of ongoing campaigns and calculate annualized returns, it's available, with detailed instructions, here.
The Story Begins Here
WIX- January 2, 2022
On December 28, 2021 with the share price at $153.29, I was assigned early on a $210 put with an expiration of Jan. 21, 2022. I waited a day for the share price to increase above $159 and sold a $210 covered call expiring February 18. The covered call brought in $124.33 cash.
My History of Trading WIX
I have been trading WIX for a while now. In January, 2021, I moved it from my regular brokerage account to my Roth IRA so I would not have to pay capital gains taxes or taxes on my options income. While the share price dropped from $245 to $153, I continued to sell puts with lower and lower strike prices until I was assigned. As of January, 2022, I have brought in more than $2400 with the puts. I own 115 shares. My current break even on the position is $186.72/share.
Selling Covered Calls; When Should I Sell My Stock in Wix?
I believe that WIX is a viable stock long term, and since I use the company to host my own website, it fits my "invest in what you use" strategy. I plan to continue selling a covered call each month at $210 or above until the share price is above my break even, but I'll try to avoid assignment to sell 100 shares. When I reach the point that I can sell shares for a profit, I'll sell some (probably 40-60 shares) to reduce the size of my position and further lower my adjusted cost basis. Then I'll either use the funds for something else or write another put with a lower strike price for income. Depending on how the stock behaves, I might consider accepting assignment on a put to buy at a lower price than $210. This campaign is definitely in repair mode, but I'm not worried about it at all. I'll make it profitable either with options or with an increase in the share price- hopefully both!
Update February 3, 2022:
WIX is not treating me well. I own 115 shares with an adjusted cost basis of 186.72. I'm short a $210 call, expiring 2/18. Today the share price dropped 8%, to about $112.
There is no way I'm going to be able to sell another $210 covered call for any meaningful premium. So today I sold a put, expiring 2/18. with a strike price of $100. I was paid $410 for it.
What I hope will happen on 2/18- The share price will stay above $100, I won't be assigned to buy more shares and I can sell another put and/or another covered call to generate a little more income.
What if the price goes below $100? - As long as it is above $95, I might accept assignment to buy 100 more shares. This will reduce my cost basis for the shares I own and let me sell a covered call with a strike of $145 or $150 for more premium.
Check back after February 18 to continue the story!
Update February 18, 2022
Last night, I was assigned a day early on the $100 put I wrote on February 3. So I am now the owner of 215 shares of WIX with an adjusted cost basis of $144.48/share. The share price has tanked to $88.37.
There are a couple of ways to think about my next move. My usual approach in this kind of repair would be to sell a covered call above my adjusted cost basis, but with the share price so far below my break even, I'm not sure that's going to work. I saw an offer for a $150 call in April that would give me $10 cash. If I went all the way out to July, there was an offer for a strike of $145 that would give me $95. Neither one seems worth it.
I decided to take a different approach and think about this most recent assignment separately from the original 115 shares. I sold a single covered call with a strike price of $100 (which is what I just paid for the shares), expiring March 18. I brought in 244.33 in premium. If it's assigned, I'll have booked a total of $644 in options premiums on the $10,000 I used to secure and then buy/sell the 100 shares. I can apply that income to my break even calculations for the other 115 shares, bringing down my adjusted cost basis to about $181/share. Taking these interim profits seems like a better approach than waiting for the share price to get back up to $145.
Oh, and about that $210 covered call that will be expiring today- nothing to do there. I won't be rolling it or re-establishing it unless the share price recovers significantly.
Unless I think a company is going to go bankrupt, my rule is to never give up on a campaign until it's profitable. This one is taking longer than I expected. I'm still not (very) worried about it in the long term.
Update March 28 2022
I apologize for not keeping this trade log better updated, but I'll catch up now!
On Friday, March 4, the WIX share price had dropped to $73.08/share and I decided to sell a put with a strike price of $65, expiring March 18. I didn't think the price would drop that far, but if it did, I was prepared to accept assignment. I wrote the put, receiving $174.33. I ran the numbers on a hypothetical assignment and saw that accepting 100 shares at $65 would bring my adjusted cost basis down to $117.92.
When expiration week arrived, the share price was in the mid $70s and both the put ($65 strike) and the call ($100 strike) were out of the money, so I rolled them both to April 14, bringing in another $325.40 to further chip away at my loss for this position.
As of today, the share price has recovered to $97.04 and my adjusted cost basis on 215 shares is $141.02. I would prefer not to be assigned the call at $100, so I'll be watching it closely to see when it's time to roll if it goes in the money.
The position is still not in great shape, but I've made a lot of progress, considering I was assigned to buy it at $210/share in December, 2021!
Update April 22, 2022
On April 4, with the share price at just over $108, I bought to close the $65 put, paying $12.65. Then two days later, the share price pulled back a bit to $100.24. At that point, I sold another $65 put, expiring May 20 for $189.79 in income. I also rolled the $100 call out to May 20 and increased the strike price to $110. Those three trades resulted in a net $281.47 to further chip away at my loss and lower my breakeven on this long campaign.
Raising the strike price for the call by $10 gave me a little less cash up front. But a $110 strike instead of $100 means if the price recovers and I'm assigned, I'll get $1000 more for the 100 shares of stock. Using options is always requires a balance of risk and reward and cash now vs. better opportunities later.
I'm not going to post my trade log, but after the May expiration, I'll drop it here.
Oh, and the current share price is $84.86, keeping both options strikes ($65 and $110) out of the money.
Update May 24, 2022
On Friday, May 20, with the share price just over $66, both the $65 short put and the $110 call expired, locking in the $281.47 income I received for the options, without any stock being added to or removed from my account.
On Monday, May 23, I wrote another put, expiring June 17. With the share price still above $65, I considered whether to keep my put strike at $65 or drop it to $60. I decided to keep it at $65 because the higher strike brought in much more income ($479.33) and I thought that even if the share price drops and the put goes in the money a bit, it will still be easy to roll at that strike. I decided not to write a call yet. I'll wait until the share price recovers a bit so I can bring in more premium. Limiting my upside just isn't worth it with the low premiums available at $100 or $110 call strikes.
Today the share price is $62.35. My breakeven on the shares I own is now $137.48, and if I'm assigned at $65, the breakeven will be quite a bit lower. The plan is working, though slowly.
Update, Sept. 29, 2022
On a day when everything else in my portfolio is in the red, WIX has gained almost 4% and closed the trading day with a share price of $80.41.
Since I last reported on May 24, I have booked $1021.03 in options income. My adjusted cost basis on 215 shares has been brought down from $137.48 to $132.73, and the share price has increased from $65.84 to $80.41.
I'm currently short a $65 put and a $105 call expiring on October 21. With the put, rolling it straight out rather than reducing the strike price seems to have been the right decision. I don't expect the call to go in the money before expiration. If it does, I'll decide if I want to roll it for more income or take interim profits on the shares I was assigned to buy for $100 last February. I wouldn't mind reducing the size of this position.
Overall, I'm pleased with the improvement in the position, but I'd really like to see my adjusted cost basis lower than the current share price. I'll continue to manage it and report back after a few more expiration cycles. Updated trade record is below.
Sign up for my new course if you'd like to learn to sell covered calls, I just published it on Udemy this week and I'd love to see your name on my list of students.
Update February 1, 2023
With the current share price at 90.51, my adjusted cost basis on 215 shares is now $128.34/share. I'm short a $65 put and a $100 call, expiring February 17.
I've improved my position by rolling a $65 put and a $110 or $100 call every month to generate cash. I've applied the income to my breakeven calculations. If the share price rises above $100 in the next 17 days, I'm at risk of being assigned to sell 100 shares at $100. This would reduce my position size, but also increase my adjusted cost basis. If that happens, I will increase the strike price on the put and continue to bring in some cash.
Every year at the first of January I reconcile my options campaigns for the year to give myself a new starting point for calculations. That line on the spreadsheet in highlighted in bright yellow.
If you look closely at some of the other lines, you'll see that I usually rolled the options a few days before expiration and that in November, I rolled the put out two months to January, rather than selecting a December expiration, and I made a note that the premium was better for a 2-month roll.
Update: April 24, 2023
On April 4, I hit a major milestone in my efforts to unwind this unwieldy position. For the first time since the end of December, 2021, I was able to sell a covered call for meaningful premium, with a strike price above my breakeven point.
Here's how I got there. On February 10. with the share price just over $85, I rolled a $65 put and a $105 covered call out to expire on March 17. I brought in $89 and $134 on the rolls (rounded to the closest $1.) Then, on March 17, with the share price just over $89, they both expired out of the money. At that point, I still owned 215 share with an adjusted cost basis of $127.30.
On March 23, I sold a covered call with a strike price of $110 and an expiration date of April 21, for $139.34 in premium, bringing my breakeven point down to 126.65, but leaving myself vulnerable to a whipsaw risk if the share price rose above $110 and my shares were called away.
So, on April 4, I rolled the call out and up to June 16, raising the strike price to $130. I only got $94.68 in premium on a 78-day holding period, and my adjusted cost basis was 126.21, which was still significantly higher than the share price of $99.81, but I improved the position in one important way. I had finally eliminated the risk of being whipsawed, even though I was still underwater on the trade.
Now it's April 24. The share price has pulled back again, to $88.73, so I decided to chip away from the other side a bit. I just sold a put, with a strike price of $70, expiring June 18. I brought in $134.34 in premium, which is 13.22% annualized on the $7000 of capital I'm using to secure the put. My break even point on the share price is now $125.59. My plan is to avoid assignment on the put, but I might consider accepting assignment on the call if it goes in the money.
Check back in July and see where things are!
Update: September 11, 2023
Since my last status update, the WIX share price has fluctuated between about $73 and $101. Today, it closed at $94.68.
The put I sold on April 24 expired out of the money, so on July 25, I sold another one, with the same $70 strike price, set to expire on Sept. 15. I was paid $154.34 in premium, resulting in a projected, annualized rate of return of 15.48% on this leg of the trade.
The price of the stock quickly rose to $92.15, allowing me to buy to close the position for $25 on August 10. The final outcome of the trade (sell to open/buy to close) was a 42.15% annualized return on the net credit of $129.34 in 16 days. Closing the position early locked in my gains quickly, and freed up the $7000 collateral to be used for other purposes.
By the end of July, I had brought my average cost per share below $125. The share price of the stock was high enough to allow me to sell another covered call above my breakeven point for only the second time since December, 2021.
On July 31, I sold a call with a strike price of $130 and earned 24.34, and on Sept. 1, I rolled it out to October 20 for another $23.68. The premiums are small, but they contribute to lowering my breakeven point, and I am not at risk of the shares being called away from me at a loss.
My plan is to continue selling covered calls above my breakeven until I can sell 100 shares for a profit. Then I'll reassess this campaign.
Below, find all the trades I've made on WIX since April, 2023. You may notice that I have added two new columns to my spreadsheet - NLV stands for "net liquidating value." It reflects the current value of the entire position as reported by my broker. The profit/loss column is a sum of the NLV and total expense/income. As always, the bright yellow lines are interim calculations that are helpful to me in my trade analysis.
If you are interested in my ongoing efforts to wrestle this position to profitability, I hope you will subscribe!
And if you want to learn more about trade management, I am currently working on a sixth chapter for my ebook, The Novice Investor's Guide to Stocks, Funds, and Options. The new chapter will cover "Trade Management for the Not-so-Novice Investor." I'll send out a notification when the book is updated.
Update: November 3, 2023
On October 16, with the $130 call about to expire and the share price just over $85, there was no premium to be had rolling the call.
I decided to sell a second covered call with a strike price of $100, expiring November 17. I received $129,34 in premium, lowering my adjusted cost basis to 123.56/share. I know the strike is lower than my actual breakeven point, but since I own 215 shares, I decided to once again secure a call with the shares that were assigned at $100 in February, 2022. I'm hoping the call won't be assigned, since I don't want to sell the shares for that price. But if the call goes in the money, I'll roll it out or up for more premium. And if I can't avoid assignment, I'll wheel it.
On October 20, the $130 call expired.
Since I already own 215 shares, I don't plan to expand the position, and I'm planning to just sell a single covered call at a time. Being assigned to sell 100 shares would not be a terrible outcome, though. Even though I'd rather it not happen, assignment of the call would allow me to sell both out of the money puts and calls without expanding the position.
Oh, and yesterday I published the second edition of my book, The Novice Investor's Guide to Stocks, Funds, and Options. The new chapter, "Trade Management for the Not so Novice Investor," explains how I weigh all the factors that go into my decisions to do nothing, buy to close, or roll a contract, and it has an elaborated explanation of the calculations and the spreadsheet I use.
If this trade journal is interesting to you, you should check it out. (The related Udemy course is still under construction and will be ready soon.)
Update: January 23, 2024
It's a great day! This position is officially profitable! Since November, 2023, this is what has happened.
On November 17, with the share price at $96.79, the $100 covered call expired worthless and no shares changed hands.
On November 20, the share price rose to 101.30. With my breakeven on my shares at 123.95, I sold a covered call with a strike price of $125, expiring 1/19/24. The strike was above my breakeven.
Then, on December 28, 2023, the share price was $125.05, allowing me to sell some shares to lock in a small profit on the position. I decided to manage this trade from both sides by selling both (out of the money) puts and calls.
I sold 98 shares for $125.05, then sold a put with a strike price of $120, expiring January 19, 2024. I received $209.34 for the put and wrote the following instructions on my trade log:
The December 28 move brought my adjusted cost basis down to $121.24 for 117 shares. I was short a $120 put and a $125 call.
On January 8 I rolled the covered call out and up from a January 19 expiration to February 16, and from a $125 strike to $130. I received $148.68 for the roll and increased my potential income for the shares by $500.
On January 16, with the share price at $124.29, I rolled the put out a month and reduced the strike price from $120 to $115. I received 173.68 for the roll.
And that brings me to today.
Share price: $128.54
Own 117 shares.
Short a $115 put and a $130 call, both expiring February 16.
Both options are out of the money.
Current net liquidating value of the position: $14,421
Total expense since position opened: -$13,863
Average price per share: $118.49
Total (unrealized) gain: $557
Next steps: I'm hoping the put will expire on February 16. I will continue to roll the covered call. My usual strategy for rolling a covered call is to roll up for >10% annualized return (on the potential cash value of the position), or roll straight out for >15% annualized.
I've been working to repair this position for two years, and I'd like to actually make a profit on it. My goal right now is to make a profit of some size, then hold a few shares long.
Keep track of your trades with your own spreadsheet.
If you would like to have your own spreadsheet, I have recently made mine available for download.
While you may buy and sell shares at a loss or profit and roll or adjust your options several times before they are assigned or closed, your brokerage firm probably only shows you the profit and loss of your current open trades. Accurate records will help you maintain a longer view of your strategies and make decisions based on projections and complete information. Get a spreadsheet with detailed 13-page PDF instructions: $7.50
April 15, 2024: State of the Trade
Share price: $123.96
Own 117 shares.
Short a $135 call, expiring May 17.
The call is out of the money.
Current net liquidating value of the position: $14,128
Total expense since position opened: -$12,627
Average price per share: $107.93
Total (unrealized) gain: $1501
How did we get here? Since the last update:
On January 25, I rolled a put out to March 15, with a strike of $115, for a premium of 248.68. When the share price increased, on February 22, I paid ($33.65) to close it almost a month early to lock in the majority of the premium and free up the capital for other purposes in my portfolio.
Also on January 25, I rolled a covered call with a $130 strike price to March 15 and brought $373.68 into my cash balance. The next roll brought in 293.68, and with the third roll, I raised my strike price to $135 with a May 17 expiration date, and brought in another 138.68.
So even though the WIX share price is about $5 lower than my last update, I have improved my position in several ways. I eliminated the $11,500 capital requirements of the put, thus reducing my position size, and I have brought in enough options income to reduce my breakeven by more than $10/share. My current (unrealized) profit is almost $950 higher than it was in January and I've reduced my capital requirements by half.
My current plan is to continue selling covered calls above my breakeven and exit the position with a respectable profit. I'm looking forward to a little less drama around this position, so I'll decide in May if it's worth rolling or if it's finally time to say good-bye to this long campaign!
2/3 Update: Wix is not treating me well. I own 115 shares with an adjusted cost basis of 186.72. I'm short a $210 call, expiring 2/18. Today the share price dropped 8%, to about $112.
There is no way I'm going to be able to sell another $210 covered call for any meaningful premium. So today I sold a put, expiring 2/18. with a strike price of $100. I was paid $410 for it.
What I hope will happen on 2/18- The share price will stay above $100, I won't be assigned to buy more shares and I can sell another put and/or another covered call to generate a little more income.
What if the price goes below $100? -…