New Position: PSA

Compared to most of the time, I have an unusually large amount of cash sitting on the sidelines as several positions have been called away this month.  And that is a trend that may continue through the week – my SPY weekly at $168 is in the money, and my PFE Aug $29 is in the money and goes ex-dividend next week.

Since I like to have only 5% of the Rescue My Account value uninvested, why the delay?  The market has risen so dramatically over the last month, getting back to May levels and then passing those highs, that I find myself taking a little more time making decisions about my positions. 

My criteria remain:  S&P 4- or 5-star rated shares, annual dividend yield of 3-5%, and companies that are part of the S&P 500 Index. This combination ensures that there is liquidity for the options, that there is room for the shares to rise, and some level of due diligence has been done on them by others, so I don’t have to do as much myself.

These standards should reduce some of the risk of new investments at these levels – I’m counting on the portfolio to take care of me in this respect.  Still finding it a little hard to pull the trigger on new trades just now.

I chose PSA for a new position recently – it meets these criteria, and then some. 

Here’s the analysis: 

PSA

Transactions

7/22/2013 Bought 100 shares at $163.52 net (total $16,352.00)
5/20/2013 Sold 1 PSA Sep 2013 $165.00 for a net of $351.74

Net Profit:

1) Options Income:  = $351.74
2) Dividend Income: Ex-date is 9/10/2013, dividend is $1.25 ($125.00)
3) Capital Appreciation if assigned at $165.00:  $130.89

Total Net Profit if Assigned and dividend collected:  $607.63
Absolute Return on Investment: ($607.63/$16,352.00) = 3.72%
Annualized Return if Assigned (60 days):  3.72%*(365/60) = 22.61%