Three New Positions: COP, DVN, IP

As soon as I have taken a look at the deltas on my expiring positions in a given month, I begin planning for how to reinvest the proceeds from the ones I am likely to have called away.  I try to maintain a small cash position that is around 5% of the balance of the account, because I figure that I will need to manage about 5 to 10% of the value in cash when I am using the funds during retirement, but everything after that needs to get back to work without any downtime.  My sense of things is that if I don’t manage Rescue My IRA this way, there is a chance that I won’t hit my goal of an annualized return of 12%.

With four positions getting called away in May, I had about $35K to get into new positions, and with the market topping out right now, I also had to evaluate where I think things are headed.  Last month, I believed that the motto should be “Sell in May and Go Away,” but now I’ve come around to the thought that the market has broken into new territory and will stay here through the summer, with a chance of a new run up at some point.

I chose three new positions and set them up with the opportunity for small capital gains.  They also all have ex-dividend dates coming up during the course of the contracts.   

Here’s the analysis:  

COP

Transactions

5/20/2013 Bought 200 shares at average share price $64.18 (total $12,835.00)
5/20/2013 Sold 2 COP June 2013 $65.00 for a net of $92.49

Net Profit:

1) Options Income:  = $92.49
2) Dividend Income: Ex-date was May 22, dividend is $0.66 ($132.00)
3) Capital Appreciation if assigned at $65.00:  $147.89

Total Net Profit if Assigned and dividend collected:  $372.38
Absolute Return on Investment: ($372.38/$12,835.00) = 2.90%
Annualized Return if Assigned (30 days):  2.90%*(365/30) = 35.30%

DVN

Transactions

5/21/2013 Bought 200 shares at average share price $60.07 (total $12,014.80)
5/21/2013 Sold 2 DVN June 2013 $60.00 for a net of $292.49

Net Profit:

1) Options Income:  = $292.49
2) Dividend Income: Ex-date is June 12, dividend is $0.22 ($44.00)
3) Capital Appreciation if assigned at $60.00:  -$31.91

Total Net Profit if Assigned and dividend collected:  $304.58
Absolute Return on Investment: ($304.58/$12,014.80) = 2.54%
Annualized Return if Assigned (30 days):  2.54%*(365/30) = 30.84%

IP

Transactions

5/21/2013 Bought 200 shares at average share price $47.93 (total $9,585.00)
5/21/2013 Sold 2 IP June 2013 $48.00 for a net of $220.48

Net Profit:

1) Options Income:  = $220.48
2) Dividend Income: Ex-date was May 22, dividend is $0.30 ($60.00)
3) Capital Appreciation if assigned at $48.00:  -$2.11

Total Net Profit if Assigned and dividend collected:  $278.37
Absolute Return on Investment: ($278.37/$9,585.00) = 2.90%
Annualized Return if Assigned (30 days):  2.90%*(365/30) = 35.33%