Monday, April 23, 2012

New Position: SWK Jun 75

After my position in NVS was assigned on options expiration Friday, I searched for a new position to replace it with- this time looking at a tip from Jim Kramer.  I don’t watch the show very much, seriously – he’s very good but how much of that can you take?  Anyway, he called my attention to SWK, which had just reported earnings and had taken a hit in the market despite good results.
Looking into it, I found an opportunity that met my criteria and offers the potential for a hat trick – a gap up to the old price by a June contract expiry, and an ex-date in June before expiration, so I jumped in. 
Here are the details:

4/23/2012 Bought 100 shares at a total of $7,291.50, basis $72.92
4/23/2012 Sold 1 SWK Jun 2012 75 at a total of $161.74

Net Profit:

1) Options Income:  = $161.74
2) Dividend Income: $41 (Early June ex-date)
3) Capital Appreciation if assigned at $75:  $191.32

Total Net Profit if Assigned and dividend collected:  $161.74 + $41 + $191.32 = $394.06
Absolute Return on Investment: ($394.06/$7,291.50) = 5.40%
Annualized Return if Assigned (60 days):  5.40%*(365/60) = 32.88%
On the date today, SWK’s price was out of the money (OTM).

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