I have been taking
profits all this month, so I’m left flush with cash in Rescue My IRA. I am building a cash reserve for now as I
prepare to move to a Scottrade Options First account, and begin working with
Cash Secured Puts in addition to my beloved Covered Calls. I may be diversifying my approach with this
account further, which is another reason to have a relative high cash balance –
but I still have 10 covered positions in play!
I decided to look at
developing a covered call position on an electric utility, since that
high-dividend sector has been badly beaten down in the recent market. My screen delivered five candidates, and
after evaluating the trades I could make with them I settled on SO – bought 300
shares and sold a 41 Feb contract on them, with the potential for a dividend
coming up before expiration...making this a potential hat trick.
Here are the details
of the new SO position:
SO
Bought 300 shares at a total of $12,082.00, per share basis $40.27
Sold 3 SO $41.00 Feb
2014 for a total of $184.24
Net Profit:
1) Options Income: $184.24
2) Dividend Income: $152.25 (January ex-date)
3) Capital Appreciation if assigned at $41.00: $200.89
Total Net Profit if Assigned and dividend collected: $537.89
Absolute Return on Investment: ($537.89/$12,082.00) = 4.45%
Annualized Return if Assigned (75 days): 4.45%*(365/75) = 21.65%
In my opinion this is a great move for your IRA. I recently wrote about doing covered calls on electric utilities on the safe-options-trading-income site blog. Best wishes for continued success and thanks for sharing your trades.
ReplyDeleteOptionsMike - I'll check out your post! I had been worried that the low volatility of these stocks might make it a challenge to use them in the Rescue My IRA account. My experience is coming along though, so I think I can employ them here - we'll see.
ReplyDeleteFYI readers, there is a link to OptionsMike in the blog roll - look for the "Safe-Options-Trading-Income" link in the far right column.
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