Monday, December 16, 2013

New Position: SO

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:

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%


  1. 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.

  2. OptionsMike - 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.

  3. FYI readers, there is a link to OptionsMike in the blog roll - look for the "Safe-Options-Trading-Income" link in the far right column.