As I was reviewing the
13-odd positions in the Rescue My IRA account over the weekend, I found an
opportunity to improve my returns on CSCO with a roll-out from the
April 21 to May 21 covered call contract.
It is a standard practice for me to take a look at opportunities
whenever the premium on one of my contracts approaches about $.20 per share –
that’s when I figure I have extracted the lion’s share of value from the time
premium.
In the case of CSCO,
this was happening as the stock was approaching an ex-dividend date, which I
forecast as April 3. So, with the stock
hovering just out of the money yesterday and the option premium in the mid-20’s,
I decided to complete a roll-out in order to see if I could claim the dividend
and still maintain the excellent stock return I stand to earn at this strike
price. The adjustment added a net of
about $140 to the total returns I’ve had on this position.
Here’s the analysis of
the CSCO position.
CSCO
The CSCO position
consists of 500 shares. My average basis
is $19.06 per share, and the stock is currently bumping up against $21, the
strike price where I am writing monthly covered calls – I rolled my April
contracts out to May with this transaction.
Total option
premiums: $194.10 (this is lower than
typical because I rolled-up the position earlier this year and traded premiums
for the stock gain)
Total dividend payments
(including the forecast April ex-dividend):
$182.00
Total stock gain at $21: $950.71
Total, absolute gain
on the position: $1,326.81
Total, absolute return
percentage ($1,326.81/$9,532.18): 17.47%
Annualized total
return percentage (held approx 240 days):
26.57%
No comments:
Post a Comment