Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. In 2011, I took some old 401(k) accounts and combined them into a self-directed IRA with Scottrade, and established a strategy of using covered calls to stabilize and enhance my returns. Rescue My IRA chronicles the progress of my IRA rescue using this approach.
Sunday, November 18, 2012
Called Away on F
This is one of those cases where I wish I
could put more trades together like this more often, but my little position in
Ford, symbol “F,” has been called away during the November expiration.This was a 60-day trade, and I set it up as basically
an in-the-money trade – the average share price was just a little more than
$10, and I sold November 10 calls when I established the position with some
proceeds from call assignments back in September.
Basically, I was trading for the option premium
and a dividend, at first with the hope of an early assignment – which should
have happened but didn’t – because I would have turned the profit a few weeks
early. As it happened, because the call
wasn’t assigned, I was able to collect the dividend on these shares as
All totaled, I netted $128.38 on the trade,
which had a basis of $4,022.50. That’s
3.19 percent that I collected over a 60 day investment, working out to an
annualized return – remember I calculate this simply as a metric to help evaluate
trades – of 19.42%, which exceeds my goal of a 12% return.
Here is the record on this position, as usual,
net of fees and commissions:
9/18/2012 Bought 400
shares at an average price of $10.06, total position basis $4,022.50.
11/16/2012 Sold on
assignment 400 shares at $3,982.89, average share price $9.96.
Total stock gain(net
of commissions): -$39.61
9/18/2012 Sold to open
4 10 Nov 2012 contracts, net $147.99
1) Stock gains: -$39.61
3) Dividend Income: $20.00
Total Net Profit after
Absolute Return on Investment: ($128.38/$4,022.50) = 3.19%
Annualized Return (60 days): 3.19%*(365/60) = 19.42%