We had an erratic
trading week with a couple of down days and a couple of up days – that turned
out to be a perfect opportunity for me to have a look at rolling out to more
Rescue My IRA positions after I had taken care of KO: ABT and CRUS.
The ABT position was
constructed with the goal of capitalizing on a dividend run. This year I am trying to add a Bollinger band
analysis to my stock selection criteria (when I have figured out how I am going
to use this routinely, I’ll add a post), and ABT was the first contract that
used the new routine. It appeared that
from the basis near $37, a run to $38 was possible, and with the ex-dividend
date coming up during the contract period, everything seemed to come together
for the trade.
On CRUS, I took a
flyer on a 200-share position – low committed capital – and an S&P 3-star
stock with no dividend, where I would normally limit my selections to 4- or
5-star stocks that pay from two to five percent annually. There was enough volatility that I thought I
could generate a good return with an in-the-money covered call using the
weeklies, and so far I’ve been right.
Here’s the analysis of
the positions, net of fees and commissions and assuming I collect the dividend
for ABT.
ABT
The ABT position
consists of 300 shares, with a total basis of $11,110.00, or $37.03 per share. I began by selling a January $38, and just
rolled out to February. If the position
works out according to plan, I will have a hat trick of covered call, dividend,
and stock gain returns.
Total covered call
premiums: $264.73
Total dividend payments
(including the forecast January ex-dividend):
$66.00
Total stock gain at $38: $272.89
Total, absolute gain
on the position: $603.82
Total, absolute return
percentage ($603.82/$11,110.00): 5.43%
Annualized total
return percentage (held approx 50 days):
39.66%
CRUS
As I mentioned, the
CRUS trade was meant to be a quick-turn position with a small amount
invested. The position consists of 200
shares, with a total basis of $4,017.00, or $20.09 per share. I began by selling a January week 3 $20 and
just rolled it to week 4.
Total covered call
premiums: $211.47
Total dividend payments
(no dividend on CRUS): $0.00
Total stock gain at $20: -$34.11
Total, absolute gain
on the position: $177.36
Total, absolute return
percentage ($177.36/$4,017.00): 4.42%
Annualized total
return percentage (held 22 days): 73.25%
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