Rolling Up MSFT and JPM

Continuing on this trend of rolling up some of my positions, I did two more transactions this week, moving my long-in-the-tooth MSFT position from a $32 strike to a $34 strike, and my JPM position from a $50 to $52.50 strike.  As I mentioned when I posted about the CSCO trade last week, generally roll ups mean that you are trading historic revenue from option premiums for share gains, so you have to have a strategy and commit to the trade. 

With the MSFT trade, I also rolled in an October position to July.  The trade was basically break-even on the call premiums and stock gains, but by shortening the holding period by 90 days, I hope to be able to free up that cash to find a more lucrative investment.  If the position is assigned in July, I’ll show an absolute return of 8.12% - that’s the same as it would be if I’d left the original October contract in place; the annualized return, calculated for comparison, improves from 5.93% to 7.23% - well below my goal of 12% annualized.

With the JPM shares the story is much better.  I completed the trade with the opportunity for a net increase in return, around $150 and a 1% increase in absolute return.

I’ll spare the details of the MSFT trade for now, but here’s the analysis of the JPM position.

JPM

The JPM position consists of 300 shares, bought in a single lot.  My basis is $49.07 per share, and I have been selling $50 strikes, rolling them out more or less monthly.  This transaction rolled up the July $50 to a July $52.50 contract.    

Total option premiums:  -$195.31

Total dividend payments (including the forecast July ex-dividend):  $204.00

Total stock gain at $52.50:  $1,010.89

Total, absolute gain on the position:  $1,019.59

Total, absolute return percentage ($1,019.58/$14,722.00):  6.93% (increase from 5.91%)

Annualized total return percentage (held approx 115 days):  21.98% (increase from 18.76%)