Wednesday, May 8, 2013
Roll Outs: CSCO and TLT
At the start of the month, I had six positions with May contracts, and with the market bumping along at all time highs, it seemed possible that all six covered calls might be assigned on expiration day. As it turns out, my CSCO and TLT positions gradually looked less likely based on their deltas, which I use as a surrogate for covered call probability of assignment, so I rolled them out.
Here’s the analysis of the two positions:
The CSCO position consists of 500 shares. My basis is $19.06 per share, and the stock is trading between $20 and $21. After rolling up in January and February, I have been selling $21.00 strikes and rolling them monthly; this transaction rolled out May options to July.
Total option premiums: $287.59
Total dividend payments (including the forecast July ex-dividend): $252.00
Total stock gain at $21: $950.71
Total, absolute gain on the position: $1,490.30
Total, absolute return percentage ($1,490.30/$9,532.18): 19.62%
Annualized total return percentage (held approx 300 days): 23.88%
As I mentioned when I first established this 100 share position, TLT is my first ETF in the Rescue My Account. My basis is $12,329.00 and I am selling $124 strikes. This transaction rolled out the May contract to June.
It is a US Treasuries fund and appears to be negatively coordinated to the stock market as a whole. At the moment it is doing a little below my goal of 12% annualized return, but between a monthly dividend payment and rolling out monthly contracts until it is assigned, I think that performance will track my goals pretty closely.
Total option premiums: $128.49
Total dividend payments (monthly dividends!): $51.00
Total stock gain at $124.00: 53.89
Total, absolute gain on the position: $233.38
Total, absolute return percentage ($233.38/$12,329.00): 1.89%
Annualized total return percentage (held 60 days): 11.52%