Rolling-Down a Covered Call Trade During a 3 1/2 Day Contract

Core Insights - The article discusses a real-life example of a covered call trade involving Howmet Aerospace Inc. (NYSE: HWM), highlighting the implementation of a rolling-down strategy during a volatile trading week [1][7]. Trade Execution - On June 30, 2025, the company purchased 200 shares of HWM at $185.40 each [6]. - The initial call option sold was for the $180.00 strike price, which was later rolled down to the $177.50 strike price, resulting in a net credit of $0.55 per share [13]. - The final trade status indicated that the shares were sold at the rolled-down strike price of $177.50, with the market closing at $181.06 on July 3, 2025 [13]. Price Movement and Market Impact - The volatility in HWM's stock price was attributed to its removal from two Russell indexes (3000 and 1000 value indexes), which necessitated selling pressure on the shares [7]. - The price decline triggered a 10% buy-to-close (BTC) limit order, leading to the decision to roll down the option [7]. Financial Outcomes - The loss per share was calculated at $7.90, with an option credit of $6.52 per share, resulting in a net loss of $1.38 per share, totaling $276.00 for the trade [13]. - Without the options strategy, the loss would have been $868.00, indicating a total option mitigation benefit of $592.00 [13]. - The article emphasizes that significant returns can be achieved even in short-term defensive covered call trades, demonstrating effective position management [13].