Covered Calls on Corning (GLW)

Readers will recall that CCI has sold puts on Corning (GLW)  many times in the past.  The main rational for this trade has been GLW's $14 book value, single digit p/e, and technology core competencies.

Frankly, CCI has done this so many times that I've lost count.  Usually the puts have expired  or a small profit from option premiums have been taken.  However, the July $13 puts ended up being assigned.  A scenario for which  a put seller always needs to be prepared.  With the credit for this put sale the stock was acquired at an effective price of $12.51 at July expiration. 

With GLW trading back over $13, CCI now switched the strategy and sold the $13 Oct calls against this position for $.40.   Three scenarios

• The stock falls back well  below $13 fairly soon  - Oops, not good, but CCI will harvest a great deal of the option premium and re-evaluate next steps.
• The stock will hover just below $13 - The option will be held until October and expire. The effective cost basis for the holding will be down to $12.11, and CCI will likely look for opportunities to sell calls again.
• The stock will stay above $13 through October - The stock will be called away.  CCI will take the 7+% over three months gain ($13.40 - 12.51) and redeploy the capital.