Last week I rolled out
the KO position from January to February, which I have held since the summer of
2013. I started by selling $41 strikes,
but the current covered call contract is $40.
The stock was in the money at this level by the end of the week.
This roll-out brought
the KO position in line with the Rescue My IRA goals for annualized returns of
12%; however, to realize this return I will have to hold it until the February
contract is called away and collect a dividend.
It’s probably more likely that the position will make a little less than
my goal for it, since it may be called at the ex-dividend date – but if that
happens, KO will deliver an overall positive return anyway.
Here’s the analysis of
the positions, net of fees and commissions and assuming I collect the dividend.
KO
The KO position consists
of 400 shares, bought in lots of 300 and 100.
My total basis is $16,142.96, or $40.36 per share. I began selling $41 strikes, but have been
selling at $40 since November and rolling them monthly.
Total covered call
premiums: $609.43
Total dividend payments
(including the forecast February ex-dividend):
$336.00
Total stock gain at $40: -$160.07
Total, absolute gain
on the position: $785.36
Total, absolute return
percentage ($785.36/$16,142.96): 6.46%
Annualized total
return percentage (held approx 210 days):
11.23%
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