Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. In 2011, I took some old 401(k) accounts and combined them into a self-directed IRA with Scottrade, and established a strategy of using covered calls to stabilize and enhance my returns. Rescue My IRA chronicles the progress of my IRA rescue using this approach.
Sunday, September 15, 2013
Last week my September contract on BA reached
the point where unwinding it made sense, so I took quick action and closed the
position. To me, the goal of an
unwinding transaction is to capture the profit in the stock price, which will
often mean trading off some covered call premiums, as it did in this case – but
the goal also has to be to get the money back to work quickly. As it turns out, I was able to use these
proceeds and a little additional cash to put two new positions into play, and I
will post about them later in the week.
I held the BA position for 80 days, and the
position exceeded my goal of a 12% annualized return by earning more than 24%
annualized during this period. That’s
pretty good – I wish I could count on that every time.
In any case, here is the final record on this
position, net of fees and commissions:
Bought 100 shares at for
$10,317.00, or $103.17 per share.
Sold on unwind 100
shares at $10,957.80, average share price $109.58.
(As I’ve mentioned in
posts about unwinding positions, the higher sell price is the result of buying
to close option premiums, which can turn this revenue source negative over the
course of the position)
1) Stock gains: $623.69
3) Dividend Income: $48.50
Total Net Profit after
Absolute Return on Investment: ($559.17/$10,317.00) = 5.42%
Annualized Return (80 days): 5.42%*(365/80) = 24.73%