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.