Unwinding AFL and PFE

Once the delta on one of my covered calls reaches 1.0, there is a good chance that unwinding it will allow me to capture most of the profit budgeted for that position and free up the capital to use in a new one.  The only thing to come to terms with is the tradeoff between the covered call premiums that have been collected and the additional stock price gains – they offset each other.  So this week AFL and PFE reached this situation, and I took action to close them out.

I’ve already gotten part of the capital back into the market – a new position with WFC, and then a rule breaker with FB – but those will be topics of new posts in the next few days.

Meanwhile, the positions earned a 19.24% and 17.86% annualized return, respectively - well above my goal of a 12% annualized return.  

Here is the record on the AFL and PFE positions, net of fees and commissions:

AFL

Shares:

200 shares at an average price of $51.62, total position basis $10,324.00

Sold on unwind 200 shares at $13,288.76, average share price $66.44

Total stock gain:  $1,964.76

Options:

Total options income (net, includes the unwinding costs):   -$1,615.95

Dividend:

Total dividends collected:  $175.00

Net Profit:
Total Net Profit after Unwinding:  $1,523.81
Absolute Return on Investment: ($1,523.81/$10,324.00) = 14.76%
Annualized Return (280 days):  14,76%*(365/280) = 19.24%

PFE

Shares:

Bought 400 shares, position basis $11,031.00, average price $27.56

Sold on unwind 400 shares at $12,272.78

Total stock gain:  $1,271.78

Options:

Total options income (includes unwinding costs):   -$636.04

Dividend:

Total dividends collected:  $96.00

Net Profit:
Total Net Profit after Unwinding:  $701.74
Absolute Return on Investment: ($701.74/$11,031.00) = 6.36%
Annualized Return (130 days):  6.36%*(365/130) = 17.86%