Wednesday, October 5, 2011

Money's in Transit, but First Transaction Anyhow

My transfer from the old Ameritrade account has hit a speed bump.  Some of their ETFs are not holdable in the new Scottrade account, so they were sent back and I have to do something to get the CUSIPs changed.  Honestly, I just want out of them at this point.

Meanwhile, three of the ETF holdings did transfer, and I disposed of them quickly this morning (lucky me, they were up $40 from yesterday.  I followed the sales with a simple covered call trade as follows:

Buy 100 sh. Conoco Phillips (COP) @ $63
Sell COP Oct 65 Covered Call at .95

There is a dividend date of record between now and the October expiry, the quarterly amount is .66...my goal was to be able to get this cash too, but it looks like the option expiry is before the dividend ex- date.

If my option is assigned, I will have a capital gain of about $200, an option premium of $95; and costs of around $32.  If it's not assigned, I'll collect the dividend of $66, in addition to the option premium, and costs are only $15; I'll revisit the stock strategy afterwards. 

As it stands today, the transaction will net between $140 and $260 - between three and five percent on the value of this IRA. This is an estimate and wouldn't be bad for the month of October, with the downside being I am locked in the position for a couple of weeks.

Baby steps, though.

Have I got this right?  Covered call strategists are welcome to comment.

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