Friday, November 25, 2011

Some Buy Backs

Q:  A Greek, and Italian, and a Spaniard go into a bar for a drink.  Who buys?
A:  The German.

Between the European issues referenced in the joke above - I found it in the Washington Post last week, but misplaced the source - and the inability of the "Super Congress" to reach a budget deal in the US, the markets took a major hit last week. 

With my account fully invested in positions, I looked for an opportunity to do something to help continue progress on rescuing my IRA, and what I decided I could do is to take some of the covered calls off of the table as their premiums declined in value quickly.  Targeting my December calls, I found three that I could buy back for a net profit.  I also found one January call to buy back.
  • 2 GE 17.50 Jan 2012, sold for $137 bought for $72; profit $65
  • 4 AA 11 Dec 2011, sold for $124, bought for $52; profit $72
  • 2 DIS 37 Dec 2011, sold for $155, bought for $44; profit $111
  • 2 CSX 22.50 Dec 2011, sold for $96, bought for $45; profit $51
Taken on their own merit, these trades netted a total of $299.  In addition, since three of the stocks will probably go ex-dividend during December (CSX, GE, DIS, although GE and DIS have yet to announce), these holdings are now clear of the risk of early assignment.

While this isn't a core element of the covered call strategy I adopted for my account, these profits will add to my returns, and I can now look for new covered call situations for them.  The pure execution of the strategy would have been to keep the calls until they expire. 

I hope to execute replacement trades in the next week, but will probably wait a few days for the market to stabilize after the series of down days we've been having lately.

If I am able to get these trades done during November, that will be my next post.  Otherwise, I will complete an analysis of the account activities to date and report on returns during the first two months of following this strategy.


  1. enjoying reading your posts...thanks for sharing your thoughts

  2. Thanks Chester. I was glad to find the covered call community - that's been a part of getting into this strategy. I found your blog today also, and added it to my list over there on the right.

    Best, Jim

  3. I also found this recent November decline a great time to "book" profits by buying back calls in my IRA. Taking reasonable profits as they present themselves is always a good idea.

  4. Thanks again for the encouragement and advice! In the subsequent post, I was able to complete adjustments to these four positions, including roll-outs and roll-ups, all for net credits!

    JTC Rescue