Bought back 8 calls in Realty Income (NYSE:O) to close out my covered call position. I originally sold the O Sep 2016 60.00 calls on Feb. 11 because I believed it had ran up too far too fast.
Could I have continued holding, hoping O never crosses 60 in September? Maybe, but I'm not pressing my luck. The biggest reason is that I already have over $23,000 in capital gains this year, and adding around $27,000 in dividends would make my income above my $50k goal (I start paying federal income taxes above that). If O goes significantly above 60 in Sep., I would be forced to either sell O with a large capital gain, or buy back the calls at a loss.
I took the safe route. Yes, the market is overvalued and O could fall further. The Fed could raise rates and O could plummet, but I doubt that rates that would happen this year. If nothing else, this year has shown consistent dividend payers are being chased by yield starved investors. Who knows how long this craziness can go on...
Now I no longer have to fear my O getting called away or send Uncle Sam money :)
Transaction in taxable account:
- Buy (to close) 8 O Sep 2016 60.00 calls; 118% gain
Disclosure: I am/we are long O.