Tuesday, November 20, 2012
November Adjustments, Continued: SPLS, URS, and DOW
Last week, I mentioned that I was going to focus on managing Rescue My IRA according to my trading plan as a way to keep earning returns through what looks to be a volatile market despite – or in spite of – a tepid expansion. Making things a bit more complex are the ongoing budget crisis in this country.
So this post will be about three more positions I’ve made adjustments on this month. I still have a couple to report on and will get that post up soon. Meanwhile, with the proceeds from these options and the F call assignment I need to find a new trade to complete the month.
Here’s a summary:
Here is a stock that gets a great S&P rating, but has been trading out of the money since I established the position last February. My solution has been to roll down and out the 500 share position to continue to produce a yield. I’ll manage carefully to ensure a break-even or better result when I finally allow the stock to be called away.
Rolled out the 13 Dec to 12.50 Jan
Total Option Premiums: $762.56
Total Dividends: $259.00
Total Stock Gain (if assigned): -$1,555.60
Total Absolute Gain on Position: -534.04
Absolute Return on Position: Negative
In order to get this position to breakeven or better, I will need to sell the shares at $13 or better. Assuming I will have one more adjustment before I terminate the trade, this seems doable.
In contrast to SPLS, here is a 400 share position that has generated better than 10% between the call premiums and dividends that I have collected on it. Plus, at the 40 strike there is a small stock gain, so this trade is going as you’d hope they all would.
Rolled out the 40 Jan to 40 April
Total Option Premiums: $1,477.91
Total Dividends (including forecast ex-dividend dates through contract): $240.00
Total Stock Gain (if assigned): $155.82
Total Absolute Gain on Position: $1,873.73
Absolute Return on Position: 11.84%
Annualized Return on Position (held 330 days): 13.09%
So this position will meet my 12% goal, even if assigned under the current contract.
Here is a 300 share position that is working out according to plan. I sold the 32 Dec in order to have a call premium that met my requirements for individual transactions (I like to net at least $100 where ever I can). The tradeoff at that strike would have been a small stock loss but I fixed that with this trade.
Rolled out and up the 32 Dec to 33 Mar
Total Option Premiums: $632.69
Total Dividends (including forecast ex-dividend dates through contract): $256.00
Total Stock Gain (if assigned): $327.47
Total Absolute Gain on Position: $1,216.16
Absolute Return on Position: 12.73%
Annualized Return on Position (held 270 days): 17.21%
As with URS, this position meets my goal of 12% return if assigned under this current contract.