Tuesday, January 31, 2012
Opportunity for Adjustments on GE and ACM
I saw an opportunity in the market yesterday on two positions and decided to take aggressive action. The positions were ACM and GE, and when I established the covered calls on them I had to sell pretty far out in the calendar. I was able to move both up, and did the trades for an overall gain.
In the case of ACM, the position is pretty much a wash at this point. It is a legacy in the portfolio from when I used to work there; I have 800 shares and the price basis is about $25/share. Earlier I STO for 4 22.5 Mar and 4 25 Jun 2012s, which the intention of cashing these out since they don’t fit my trading plan.
With the shares rising of late, I rolled-up the 22.5 Mar to 25 Mar. For the lower strike contract, I paid $612 to close the position, but got $88 back, plus the additional $1,000 if the contract is exercised.
In the case of GE, I had 4 18 Jun 2012 contracts. They were in the money, and basically that investment was going to sit for another five months. My basis in the shares is $16.17, so I decided I could spare a little money to move up to 18 February contracts.
The BTC cost me $628, but I got back $384 on the ITM February contracts. My net on option premiums is -$27, but I collected dividends of $68 on the shares, and my capital gain if exercised is $712. So I’m still in a good spot with this one.
Between the anticipated marginal capital gain on ACM, and the BTC/STO round trips, the total gain from this trading activity is $232. When calculated against my account balance, the percent return is about 0.18%. It’s moving in the right direction…and there will be some benefit to being able to put the cash back to work in GE’s case. And I am glad that the ACM position is getting close to a wash.