Tuesday, October 8, 2013
Two Adjustments: PSA and TXT
When I wrote my monthly summary for September, I noticed that I had made an error with my management of the PSA position. I decided that I would try and do something about that to correct what was then a poorly performing position – I had to look into the back months to do a roll-out and roll-up combination – that trade will be the first I summarize here. With the repair trade the position will earn an estimated return of almost 13%, which is in line with my goals for individual positions in Rescue My IRA.
I also rolled out the new TXT position I’d established last month. The stock is down a little, very possibly because of the government shutdown, so I decided to do an adjustment from October calls to December calls. Even by adding 60 days to the holding period, this position will earned an estimated 17% if it is called away in December.
Here’s the analysis of the two positions.
The position consists of 100 shares at a basis of $163.52 per share. This trade involved a roll-up from a $160 strike to a $165 strike, while simultaneously rolling out from October 2013 to December 2013.
Total option premiums: $477.21
Total dividend payments (including the forecast December ex-dividend): $250.00
Total stock gain at $165: $130.89
Total, absolute gain on the position: $858.10
Total, absolute return percentage ($858.10/$16,352.00): 5.25%
Annualized total return percentage (held approx 150 days): 12.77%
This is a 300 share position with a share basis of $29.30, total cost of 8,791.00. I am selling $29strikes, and the trade here rolled the contract out from October to December.
Total option premiums: $480.71
Total dividend payments (counting ex-dates through the contract term): $6.00
Total stock loss at $29: ($108.11)
Total, absolute gain on the position: $378.61
Total, absolute return percentage ($378.61/$8,791.00): 4.31%
Annualized total return percentage (held 90 days): 17.47%