Monday, October 24, 2011

New contract: IP Nov 26 CC

While I am doing some overhead activities on the new plan for rescuing my IRA (I hope to develop a strategy, business plan, and metrics) ...I did go ahead and set up a new trade (I noticed that I posted on this trade earlier, but I've corrected some figures in today's post)...I may even be assigned on it shortly, as this morning the stock is trading above the strike price today...

The company is International Paper, symbol IP.

I bought 200 shares a couple of weeks ago after the COP trade was completed. The share price was $25.29, and my commission was $7.  A dividend of about .26 is planned with an ex-date of Nov 17, during expiration week for November option contracts.  I sold two November 26 covered calls.

My calculations on anticipated return, assuming this stock continues on it's upward trend and I am assigned, is as follows: 

Share price (for 200 shares, including commission):  $5,042.10
Nov 26 call premium (2 contracts, net of commission and assignment fee):  $179.00
Dividend, if collected:  $52.50
Capital Gain, if assigned:  $157.90

If I am assigned on the covered call, my proceeds will range from about $310 to $370, depending on whether I collect the dividend, giving me a return of between 6 and 8% on invested capital for the five weeks on this contract.

If I am not assigned, the proceeds are about $250 (includes the dividend and option premium, net of fees), for a return of 4.59% for the five weeks of this contract term.

One of my colleagues from the Yahoo Covered Calls community has given me an insight on his experience with shares in IP - his strategy is to sell cash secured puts, and he's doing pretty well with them.  That's a strategy I need to look into further, and will, once I've settled on my goals and strategy for the Scottrade account.

No comments:

Post a Comment