Two Adjustments: CAT and SPLS

I rolled out and down the CAT and SPLS positions last week.  This provided about $271 in net covered call premiums, offset by some reductions in stock gains downstream if these positions are called away. 

For CAT, I rolled the 95 May to a 92.5 June – this is still above my basis, so this is still a “hat trick” position.  For SPLS, a position that is getting rather long in the tooth for the Rescue My IRA account, I am close to pulling to plug since it is not meeting my goals.  I rolled the June 15 down to an April 13, and I am honestly indifferent about having those shares called.

Here’s the analysis of the two positions.

CAT

The CAT position consists of 100 shares at a basis of $87.17.  I make money at a 90, 92.50 or 95 strike, and I have held contracts at those prices with these shares since starting the position in August 2012.  If these shares are called away in June, the position will have exceeded my 12% annual return goal on both an absolute and annualized basis.

Total option premiums:  $613.69

Total dividend payments (including the forecast April ex-dividend):  $156.00

Total stock gain at $92.50:  $515.83

Total, absolute gain on the position:  $1,285.52

Total, absolute return percentage ($1,285.52/$8,716.99):  14.75%

Annualized total return percentage (held approx 300 days):  17.94%

SPLS

This is a 700 share position I established in February 2012.  I have used past cash flow to buy a few more shares to average the price basis down; I’m now at $10,288.42 invested with an average price per share of $14.70.  In the interest of not pouring any more good money into the bad, I’m not investing any additional funds here and I am seeking to close out the position soon.

In the recent transaction I rolled my June 15 contracts in and down to April 13.  This is also one of the positions where I chased additional stock gains, trading some option premiums in the meantime…I’d have to say there is a lesson learned on that account, it’s very unlikely that I will take that strategy again. 

At least the position is getting close to breakeven…one more dividend cycle and a couple of covered call premiums would see to that, but I may not have the patience.

Total option premiums:  $458.74

Total dividend payments (counting ex-dates through the contract term):  $336.00

Total stock gain at $13:  -$1205.60

Total, absolute gain on the position:  -$410.86

Total, absolute return percentage:  Negative

Annualized total return percentage (held 365+ days):  Negative