Saturday, February 23, 2013

Some February Adjustments: DOW and AFL

It was a busy week in the Rescue My IRA account, so I have a couple of blog posts coming up in the next few days.  Today I will write about two adjustments I recently made, to stocks DOW and AFL, and then early next week I will write about some new positions I established with the proceeds from the three call assignments I had during February 2013.

As a practice, I will consider a roll-out on any position where the call I have established reaches a value of 20 cents per share or less.  Lately, I have had occasion, given the market’s action this year, to do roll-ups – closing out a lower strike and selling a higher strike, but in the two cases today the approach was more typical.

Here’s the analysis of the two positions.


The DOW position consists of 300 shares.  My basis is $31.85 per share, and the stock is trading slightly below there.  I am selling 33 strikes and rolling them monthly; this transaction rolled out March options to April. 

Total option premiums:  $656.18
Total dividend payments (including the forecast March ex-dividend):  $352.00
Total stock gain at $33:  $327.47
Total, absolute gain on the position:  $1,335.65
Total, absolute return percentage ($1,335.65/$9,554.53):  13.98%
Annualized total return percentage (held approx 300 days):  17.01%


This is a 200 share position I established in January with a 100 share purchase.  I added another 100 share lot last week, averaging my per share basis down while simultaneously rolling the position out a month.  My current share basis is $51.62, and I am selling 55 strikes – the current contract is August 2013.

Total option premiums:  $246.46
Total dividend payments (counting ex-dates through the contract term):  $175.00
Total stock gain at $55:  658.89
Total, absolute gain on the position:  $1,080.35
Total, absolute return percentage ($1,080.35/$10,324.00):  10.46%
Annualized total return percentage (held 210 days):  18.19%

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