Looking at the Back Months for Adjustments: ADM, HAL, MSFT, and WAG

This is a volatile market and looks to stay that way through the end of the year.  The choppy seas originate from a tepid expansion that looks like it could falter at any moment, problems in Europe, and the upcoming elections.  In this environment, seems like the thing to do is buckle down and manage the Rescue My IRA account according to my trading plan.

My approach last month was to trade for trading’s sake – I didn’t have a lot of positions that looked to get to an in-the-money status, so I set out to make adjustments by rolling the options out.  In a couple of places I found that I had made some bad judgment calls, selling covered calls at lower strike prices than my original purchase price for the underlying shares – although my account balance held its own and would have been okay in the short term if the shares were called away at these strikes, I felt I had made a compromise that could affect my long term returns.

I decided to work on digging out of the low strike prices for those positions, and to do so at a premium if I could.  I also have a few positions that are at 52-week lows at the moment; I’m going to be holding these for a while longer, given the economic situation.  I had to look at back months to swing this; I worked on four of my positions: ADM, HAL, MSFT, and WAG. 

I’ve finished the roll-outs and roll-ups, and have accomplished that at nearly break-even – at total cost in premiums of -$26.04, which will be offset and then some at the new strike prices.  With the current contracts, three of the four positions are set to meet my goal of at least 12% returns annually, the only exception being HAL.  That one yields 8.45% annualized – it’s a positive return, and I’ll take it.

Here’s a summary:

ADM

Rolled out the 31 Aug to 31 Dec

Total Option Premiums:  $659.72

Total Dividends (including forecast ex-dividend dates through contract): $157.52

Total Stock Gain (if assigned): $35.94

Total Absolute Gain on Position: $835.16

Absolute Return on Position: 9.23%

Annualized Return on Position (held 240 days): 14.03%

HAL

Rolled out and up the 29 Aug to 35 Jan

Total Option Premiums:  $475.60

Total Dividends (including forecast ex-dividend dates through contract): $81.00

Total Stock Gain (if assigned): $182.92

Total Absolute Gain on Position: $739.52

Absolute Return on Position: 7.18%

Annualized Return on Position (held 310 days): 8.45%

MSFT

Rolled out and up the 33 Sep to 34 Jan

Total Option Premiums:  $363.20

Total Dividends (including forecast ex-dividend dates through contract): $180.00

Total Stock Gain (if assigned): $429.46

Total Absolute Gain on Position: $972.66

Absolute Return on Position: 9.97%

Annualized Return on Position (held 240 days): 15.17%

WAG

Rolled out and up the 30 Jul to 35 Jan

Total Option Premiums:  $533.19

Total Dividends (including forecast ex-dividend dates through contract): $180.00

Total Stock Gain (if assigned): $361.02

Total Absolute Gain on Position: $1,074.21

Absolute Return on Position: 10.61%

Annualized Return on Position (held 310 days): 12.50%