Saturday, January 11, 2014

Rolling Out KO

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.


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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