Wednesday, January 4, 2012

New Year, New Positions, and a Special Situation

With the rollover of my old 401(k) complete, there is that exciting time of establishing new positions! 

Tomorrow I will begin to post on four of the positions:  CAT (100 shares), T (300 shares), MSFT (400 Shares), and DRI (200 shares).

There is one complicated position...in the old 401(k), I had 880 shares of the company stock (symbol ACM), since they were offered at a 10% discount.  I took advantage of this, intending to manage the position as 20% of my account value - it didn't quite work out that way and the position was a little overweight at the time of my layoff.

That would have been easy enough to manage, except that the stock dropped 25% within the week of my layoff, and I was stuck in a place where I couldn't do anything about it.  So although I could liquidate the mutual funds, I decided to roll these shares and write covered calls against them.

I sold the 80 shares at a loss, but for accounting purposes, I valued the shares at $25 each.  The remaining position is still overweight in the Rescue My IRA portfolio, so I split the contracts between a Mar 22.5 and a Jun 25, laddering up to recover most of the investment.  Even so, if I am called on both contracts, I will take a capital loss that totals about $1,000 on these shares - I'll have some work to do to make up for this, but the position has risk that I need to manage down, so the calls should help mitigate the potential for a larger loss. 

Here's the position analysis:

12/27/2011 Transferred in 800 shares @$25.00 = $20,000
12/27/2011 STO 4x 22.5 MAR 2012 = $167.99
12/27/2011 STO 4x 25 Jun 2012 = $155.99

Net Profit Calculations:

1) Options Income:  $167.99+$155.99=$323.98
2) Dividend Income: None, ACM is a non-dividend stock
3) Capital Appreciation if assigned:  $18,982-$20,000 = ($1,018.00)

Total Net Profit:  ($694.02)

Absolute Return on Investment: (3.47%)
Annualized Return if Assigned: Not calculated.

No comments:

Post a Comment