Diversion

Tuesday, November 13, 2012

Some Adjustments for a Sideways Market: MSFT, HPQ, SWK


So far this month, the market has been fairly tepid.  At least one of the big market events has happened now that President Obama was re-elected, but the bigger potential impact looms with the “fiscal cliff” hanging out there unresolved. 

So while the economy does seem to be finding its footing ever so slowly, this dark cloud looms on the horizon, so we’re trading more or less sideways.  A quick resolution of this turmoil is in order and I hope our politicians are up to it.

Meanwhile, I’ve been taking advantage of the action to roll-out a few positions.  I’ll post a few of them today and then get the rest of them posted in a few days.

Here are the first three: 

MSFT
Rolled out and up the Jan 32.50 to Feb 33
Total Option Premiums:  $419.68
Total Dividends (including forecast ex-dividend dates through contract): $180.00
Total Stock Gain (if assigned): $129.46
Total Absolute Gain on Position: $729.14
Absolute Return on Position: 7.48%
Annualized Return on Position (held 270 days): 10.11%

The MSFT position is marginally underperforming at present.  However, I can accept this transaction if it was to come to pass – it’s very close to my objective of 12% annual on invested capital.

HPQ
Rolled down the 17 Jan to 16 Jan
Total Option Premiums:  $605.18
Total Dividends (including forecast ex-dividend dates through contract): $105.60
Total Stock Gain (if assigned): $0
Total Absolute Gain on Position: $710.78
Absolute Return on Position: 7.39%
Annualized Return on Position (held 140 days): 19.27%

Note: if this position were assigned at 16, I will take a loss on the position.  However, I monitor these positions closely on a daily basis.  If HPQ begins a recovery I will take quick action to roll the stock up to protect myself from a capital loss.

SWK
Rolled out and down the 75 Nov to 72.50 Dec
Total Option Premiums:  $580.22
Total Dividends (including forecast ex-dividend dates through contract): $82.00
Total Stock Gain (if assigned): $-58.68
Total Absolute Gain on Position: $603.54
Absolute Return on Position: 8.28%
Annualized Return on Position (held 240 days): 12.59%

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