Monday, November 4, 2013

Another New Position: FB

After setting up the new WFC position, I still had some of the proceeds left from unwinding AFL and PFE earlier this week, and I wanted to put a good amount of it back to work in the market.  I usually do a screen for this purpose, and while I was working through the list, I found myself distracted and did some random quotes on shares as they came to mind.  I thought I might check out FB to see where it was trading at; I’ve been amused by the track of that stock since it was first listed and traded so poorly the first few months.

Since S&P has FB as a 3-star stock right now and it doesn’t pay dividends, this company would not normally make it onto a screen for Rescue My IRA.  However, I found that I could make a decent trade with an in the money weekly and I pulled the trigger.  On an annualized basis, this will probably be my best ever trade…but since I broke some of my selection rules, I have to remember the bon mot and not get too carried away –

“Bulls make money, bears make money, pigs get slaughtered…”

Here’s the analysis of the FB position.



Bought 100 shares at average share price $48.97 (total $4,896.99)
Sold 1 FB wk 1 Nov 2013 $48.50 for a net of $288.74

Net Profit:

1) Options Income:  = $288.74
2) Dividend Income: FB does not pay a dividend
3) Capital Appreciation if assigned at $48.50:  -$64.10

Total Net Profit if Assigned and dividend collected:  $224.64
Absolute Return on Investment: ($224.64/$4,896.99) = 4.59%
Annualized Return if Assigned (3 days):  4.56%*(365/3) = 558.12%

You read that right – annualized return would be over 500% if I could duplicate the trade over and over.  LOL – if only!

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