New Positions: VIAB and IP

As the July expiration date approached and it began to look like my MAS and NOC positions would be called away, I began a scan for potential new positions that would meet the standards I’ve outlined in my trading plan.  I found six potential trades:  VIAB, WOR, T, CMCSA, CSCO, and SMP. 

After pulling some basic information on these stocks, I found that I was looking at a bunch of three and four star investments.  I then screened further for positions that included a dividend ex-date before an option with an appropriate strike price, either in August or September.  My list was narrowed to VIAB and WOR – and I planned to make a purchase on Monday…although, eventually I took a look at an old favorite, IP, as well.

When Monday came around, WOR had worked itself out of the price range I had set for it, and I was left with the choice of how much to invest in VIAB and IP, finally choosing to buy one lot of VIAB and two of IP.  I have enough cash in reserve for one additional lot of either of these stocks, and am considering a follow-on purchase in due time.

Here’s the analysis on the new VIAB and IP positions: 

VIAB

Transactions

7/23/2012 Bought 100 shares at $4,579.00
7/23/2012 Sold To Open 1 VIAB Sep 2012 $47.00 at $101.74

9/13/2012 ex-dividend date for VIAB, if not called away $27.50

Net Profit:

1) Options Income:  = $101.74
2) Dividend Income: The ex-date is before September expiration, potential dividend is $0.275 ($27.50)
3) Capital Appreciation if assigned at $47.00:  $103.89

Total Net Profit if Assigned and dividend collected:  $101.74+ $27.50 + $103.89= $233.13
Absolute Return on Investment: ($233.13/$4,579.00) = 5.09%
Annualized Return if Assigned (60 days):  5.09%*(365/60) = 30.97%
On the purchase date, VIAB was out of the money.   

IP – 8/12 Position

Since this is my second IP position, I am designating it with the initial options expiration date for the trade.

7/23/2012 Bought 200 shares at average share price $32.30 (total $6,459.00)
7/23/2012 Sold 2 IP Aug 2012 33, total $98.49

8/13/2012 IP ex-dividend date, if not called away $52.50

Net Profit:

1) Options Income:  = $98.49
2) Dividend Income: Ex-date is 8/13, $52.50
3) Capital Appreciation if assigned at $33:  $123.89

Total Net Profit if Assigned and dividend collected:  $98.49 + $52.50 + $123.89 = $274.88
Absolute Return on Investment: ($274.88/$6,459) = 4.26%

Annualized Return if Assigned (30 days):  4.26%*(365/30) = 51.78%
On the purchase date, IP was out of the money.