Spring Flowers at Hawksbill Cabin

Spring Flowers at Hawksbill Cabin
Spring Flowers at Hawksbill Cabin

Wednesday, July 30, 2014

New Position: DIS

A year or two ago I put together a trade on DIS – it is a four-star rated Dow stock that pays an annual dividend.  The earlier trade was a successful one for Rescue My IRA, so I decided to start a new position in DIS after the series of unwind trade I had just completed.  That’s even despite the double-digit gains this stock has already recorded year-to-date.

Unless the shares are called away, my plan will be to roll the shares out monthly until I collect the dividend, or to write a call that will be assigned in December during a prospective dividend run.

Here is a summary of the position plan for DIS, net of commissions and fees.

DIS

Transactions

Bought 100 shares at average share price $85.78 (total $8,577.93)
Sold 1 $87.50 Aug 2014 covered call

Net Profit:

1) Options Income:  = $83.74
2) Dividend Income (December ex-dividend): $0.00
3) Capital Appreciation if assigned at $87.50:  $154.07


Total Net Profit if assigned and dividend collected:  $237.81
Absolute Return on Investment: ($237.81/$8,577.93) = 2.77%
Annualized Return if Assigned and Dividend Collected (30 days):  2.77%*(365/30) = 33.73%

Tuesday, July 29, 2014

Unwinding F

It seems that July has turned into Rescue My IRA’s month of threes – after three roll-out and up transactions, I recently completed a third unwind transaction, including the one I am posting on today, for F.  I have three transactions I need to post – on Monday I rolled out PFE and FB, and today I unwound CAT.  After starting the month with 15 positions in play, Rescue My IRA now has 12 as July comes to a close – I’ll have one more post to put up about a new position before I post monthly results.

Meanwhile, here is the final analysis of the F trade, net of commissions and fees:

F

Shares:
Bought 500 shares in March 2014 at an average price of $15.32, total position basis $7,662.00
Sold on unwind 500 shares at $8,862.85. 
Total stock gain:  $1,200.85

Options:
Total options income:   -$690.56 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:
Total dividends collected:  $62.50


Net Profit:
Total Net Profit after Unwinding:  $572.79
Absolute Return on Investment: $572.79/$7,662.00) = 7.48%
Annualized Return (135 days):  7.48%*(365/135) = 20.21%

Thursday, July 24, 2014

Unwinding MAT for a Rare Net Loss

Generally speaking, when I select stocks for Rescue My IRA they meet the following criteria:  ranked as 4- or 5-stars by S&P, S&P 500 Index stocks, dividend yield ranging from 3 to 5 percent.  Sometimes I will also add a technical criterion by checking the 52-week trading range or the Bollinger Bands, but I am less consistent about that.  So, when MAT was recent downgraded to a 2-star stock, it fell well outside of my typical stock pick universe, so I took the unusual step of divesting the 200-share position.

I opened the position in April with a basis of around $40, and sold covered calls with $40 strikes, rolling them out monthly.  Earlier this week, I bought to close my October 2014 contracts and sold the stock at around $35 per share – but I had collected premiums and dividends, so the stock loss was mostly offset. 

This was only the fourth time or so in the three-year history of Rescue My IRA that I took such a loss; when I first started the account I might have moved more quickly on some shares when they were downgraded from 4-stars to 3-stars, but I have learned that patience generally pays off in those cases.  This time, my pick went from 4-stars to 2-stars, and the prospect of a long road ahead simply wasn’t appetizing.

Here is the final analysis of the MAT trade, net of commissions and fees:

MAT

Shares:
Bought 200 shares in April 2014 at an average price of $40.18, total position basis $8,036.00
Sold on unwind 200 shares at $7,133.44. 
Total stock loss:  -$902.56

Options:
Total options income: $401.95

Dividend:
Total dividends collected:  $76.00



Net Profit:
Total Net Loss after Unwinding: 
-$424.61
Absolute Return on Investment:
-$424.61/$8,036.00) = -5.28%
Annualized Return not calculated on the holding period of 110 days.

Monday, July 21, 2014

Unwinding T

Last week I unwound the 200-share Rescue My IRA position in T after collecting the July dividend and prior to its August expiration date - for background, I treat dividends as collected if I hold the shares on the ex-dividend date. I had purchased the shares in June and sold an August $35 covered call against them, but with the Delta on that contract moving past 1.0 last week I took advantage of the opportunity for an early close out of the trade.

Here’s the final analysis of the T trade, net of commissions and fees:

T

Shares:
Bought 200 shares in June 2014 at an average price of $35.09, total position basis $7,018.98.
Sold on unwind 200 shares at $7,294.95, total stock gain:  $275.87

Options:
Total options income:   -$223.01 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:
Total dividends collected:  $92.00



Net Profit:
Total Net Profit after Unwinding:  $144.86
Absolute Return on Investment: ($144.86/$7,018.98) = 2.06%
Annualized Return (35 days):  2.06%*(365/35) = 21.52%

Saturday, July 12, 2014

TGT: Rolling Up and Out

This may be the only time I ever posted three trades in a row where I was doing the same kind of adjustment on the positions.  On Thursday, I took advantage of the market hiccup to roll my TGT position out a month and up a strike price, just as I did earlier in the week for AAPL and IP. 

I moved the TGT contract from an August weekly at a strike price of $58.50 out to the regular September contract at a strike price of $60.  The trade was nearly a breakeven on premiums, setting me back about $7 in covered call premiums given up, but I’ve assured myself of a chance to receive the August dividend, and I have added the possibility of $1.50 per share in stock gains.  Plus, the estimated annual return is almost 24% for a two month trade – double my goal of 12% annualized.

Here’s the analysis of the TGT position as of this most recent trade, net of fees and commissions, and assuming I collect dividends through the holding period.

TGT

This is a 100-share position with a basis of $5,839.99, or $58.40 per share.  I set the position up to trade weeklies, but this trade rolled it out to a monthly basis.

Total covered call premiums:  $92.23
Total dividend payments (August ex-dividend):  $52.00
Total stock gain at $60:  $142.01
Total, absolute gain on the position:  $286.24
Total, absolute return percentage ($286.24/$5,839.99):  4.90%


Annualized total return percentage (held approx 75 days):  23.85%

Thursday, July 10, 2014

IP: Rolling Out and Up

There was an unusual distribution on my IP shares – they spun off a part of the company and received some cash.  All of that led to an extra dividend in the form of three shares on my 200-share position, and a small amount of cash.  Making it that much more complex was the adjustment to the covered calls I’d written – I had to hold all of those items until expiration.

I resolved to streamline the position by rolling out and rolling up, and put the strategy into action as soon as regular options became available again.  I was able to buy to close the adjusted July $49 option, sell the three shares of the new company, and sell the August $50 option with a net cost of four bucks, improving my total returns to nearly 12% annualized in the process.

Pretty complication transaction all in all, but sometimes that is the way it is.   

Here’s the analysis of the total return on the IP position to date, net of fees and commissions, and assuming I collect dividends through the holding period.

IP

This is a 200-share position established in May 2013, with a basis of $9,592.00, or $47.96 per share.  I have sold strikes ranging from $47 to $50 and rolling them monthly during the holding period.

Total covered call premiums:  $583.38
Total dividend payments (includes the spun-off shares):  $428.08
Total stock gain at $50:  $390.00
Total, absolute gain on the position:  $1,401.46
Total, absolute return percentage ($1,401.46/$9,592.00):  14.61%


Annualized total return percentage (held approx 455 days):  11.72%

Tuesday, July 8, 2014

AAPL - Rolling Out and Up

Last week I rolled the AAPL position out from August to September, and up from a $95 strike price to a $97.50 strike price.  When I established the position back in June, I expected that I would just work with it on weeklies and then have the position called away quickly, but it has turned out to be more of a mid-term opportunity, now forecast to run three months or so.

And that’s okay by me – if the position goes the distance to the September contract, it will wind up as a hat trick, with earnings from call premiums, dividends, and a stock gain.  It also will have generated a 6% return over just about 90 days, which works out to 26% annualized – far exceeding my goals for a 12% annualized return.

Here’s the analysis of the position, net of fees and commissions, and assuming I collect dividends through the September expiration.

AAPL

This is a 100-share position acquired post-split, with a basis of $9,380.99, or $93.81 per share.  I was selling $95 strikes and rolling them weekly, then monthly, before the roll-up to $97.50.

Total covered call premiums:  $211.46
Total dividend payments (August ex-dividend):  $47.00
Total stock gain at $97.50:  $351.01
Total, absolute gain on the position:  $609.47
Total, absolute return percentage ($609.47/$9,380.99):  6.50%


Annualized total return percentage (held approx 91 days):  26.06%