Tuesday, December 13, 2011

Adding to Position: DIS

Over the last few weeks, DIS announced an increased annual dividend of $.60 per share, or $60 on lots of 100 shares, which is my usual transaction.  I held 200 shares and have a 36 Jan 2012 written against them.  With the shares trading above $36.00 and Dec expiration date coming up, with the ex-date before that even, I'd become concerned that my shares might be assigned early.

I like the returns this stock is generating for me and would like to hold it for larger capital gains, which I think are possible over the next year.  My share basis is about $34.50 and the 52-week high at the time I bought my first position was $44. I would like to sell at $40 or above.

So I decided to hedge against the early call by buying another 100 shares, which I did Monday, at $36.35.  My average basis is now $35.17.  Against these shares I sold a 37 Jan 2012, netting $84.

I should collect up to $180 in dividends from DIS, and have already collected $322 in option premiums.  If I am called at these strike prices the stock gains are $312, for a total return of $814 on an investment of $10,552, an absolute return rate of 7.7% annualized at 38%.

If I am called early on the shares this week I'll revise the results in a post on Friday.

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