It’s looking very
likely that my two longest held positions, GLW and CSX, will be called away
this Friday when the May call contracts expire. Some marriages don't last as long as these holdings have lasted - I bought the shares starting in November 2011. As expiration
day approaches and assignment seems assured, I thought I might republish my last post on them today, originally dated December 26, 2012 (with some slight edits).
The
GLW and CSX Positions – 2012 Performance
As I begin to assess
how I’ve done as a covered call investor with the Rescue My IRA approach this
year, I thought I might start with a pause and reflect on my two long-standing
positions: the 700-share GLW position, and the 500-share CSX positions.
They currently have May 2013 covered calls written on them, and I have held the
shares pretty much since the beginning of the account.
As I reported last
month, when I adjusted them with the May roll-out, I have earned a 12%
annualized return on them – easily verifiable, since I’ve held them for more
than a year. Now, I’d rather that the positions on these shares were a
bit closer in, but given the markets ups and downs, sometimes I take what I can
get.
We’ll start first with
a look at the basis for the shares.
GLW – 700 shares, purchased in several lots
at a total cost of $9,241.88, or $13.20 per share
CSX – 500 shares, also purchased in a couple
of lots, at a total cost of 10,861.01, or $21.72 per share
Over the course of
holding these shares, I have written more than 10 contracts on each of them, as
summarized in the table below:
Calculated on their
respective bases, the premiums I’ve generated on these shares work out to 15.7%
on GLW and 13.6% on CSX. These holdings have met my goals of a 12%
annualized return on the basis of the covered call premiums alone; however,
they’ve also returned dividends along the way, since one of my screening
criteria is a requirement for a dividend payment.
My goal on dividends is
to find shares that pay between 2 and 5% on an annual basis. For
GLW, assuming I hold the shares through the current May contract, I will have
received a total of $276.00 in dividends, adding another 3% to the return, for
a total of 18.7%. On CSX, the dividend amounts are $338.00, or 3.1%,
making a total of 16.7% on these shares.
The final component of
returns in the Rescue My IRA account is capital gains on the shares. On
the GLW side of the ledger, here is where we have a little bit of a problem –
at the current strike price of $13 per share I will take a capital loss on the
position of about $160. That will reduce my absolute return to 16.96% -
it still averages out to 12.14% annualized for the position over the course of
holding it approximately 510 days.
As for CSX, this stock
has been a steady performer in this department – I’ve been writing covered
calls at a $22.50 strike price since I first bought the shares, a price that
will yield a capital gain of just about $371 on the position. That works
out to an absolute return of 20.15%, which annualizes to 14.42% over the
510-day holding period, slightly better than my goal of 12% annualized.
One of the advantages
of using a portfolio model, as I do here with the Rescue My IRA account, is
that you’ll have a few positions that exceed your goals, some that fall short,
and some that perform right on target. The GLW and CSX positions are
examples of positions that have worked out as planned.
Here’s to more
positions that perform as reliably as GLW and CSX have for me over the 18
months or so I have held them.
Here's a link to the December post:
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