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.
Saturday, March 23, 2013
Called Early for the Hat Trick on URS
Earlier this month I wrote about how 200 shares
of my URS position had been called away on the ex-dividend date, March 13: I
had held a position of 400 shares, and the stock was in the money by more than
$5 – and it had remained there ever since.
For the second time during the course of the Rescue My IRA account I had
a partial assignment, but that was rectified on Wednesday this week when the
remaining 200 shares were called away. So
today’s post will be the close out entry for the URS position, which I held for
about 300 days.
I had purchased the URS shares as a replacement
for my legacy holding, ACM. I had worked
at that company and one of the benefits was the ability to purchase shares
within your 401(K) – after I was laid off there in 2011 and rolled the account
over to Rescue My IRA, I still held 800 shares, which I wrote covered calls
against. For the record, ACM does not
meet my stock purchase criteria and I wouldn’t have bought the shares in the
first place if it hadn’t been for the extenuating “legacy” circumstance. Eventually I decided to exit the position,
taking the largest loss I ever have had in this account, around $5,000 – or about
25% of the position value.
Still desiring to hold a position in a major
construction company, I chose URS, which did meet my selection criteria at the
time, and I rolled the ACM proceeds over to a 400 share position. As the analysis below shows, over the course
of the 10 months or so that I held URS, I gained back $1,900 of that loss when
the URS shares were called.
In the end, because I was able to collect a gain on the share price, dividends, and covered call premiums, URS is another hat trick position. I call that
a win for the Rescue My IRA trading plan and a lesson well learned.
Here’s the analysis of the URS position.
5/7/2012 Bought 400
shares at $39.55, total position basis $15,827.00 (the largest position to date
in this account)
3/2013 Sold on
assignment 400 shares at a strike price of $40.00 in two transactions of 200
Total options income
(a total of seven contracts): $1,477.91
collected: $280.00, including dividends
on 200 shares from the March 2013 ex-dividend date
1) Stock gains: $138.64
3) Dividend Income: $280.00
Total Net Profit after
Absolute Return on Investment: ($1,896.55/$15,827.00) = 11.98%
Annualized Return (300 days): 11.98%*(365/300) = 14.58%