Wednesday, February 5, 2014

GLW: Adding on and Rolling out

I recently picked up a 300-share lot of GLW, and then added a second 300-share purchase after a market dip last week.  The add-on purchase lowered my per-share basis from $18.76 to $18.04, so I was able to profitably move from $19.00 strikes to $18.00 on the covered call sales I make on the position. 

I have subsequently rolled-out the calls from February to April on GLW.  Although it hasn’t been announced yet, I also expect to see an ex-dividend date on these shares near the end of the month; the quarterly yield is 10 cents per share.

These factors combined to yield a 3.13% absolute return, annualizing to 18.42% after adjusting for my estimated 62-day holding period.  Here’s the analysis of the position, net of fees and commissions and assuming I collect the February dividend for GLW.


The GLW position consists of 600 shares, bought in two 300-share lots, with a current total basis of $10,823.00, or $18.04 per share.  I began by selling a February $19 covered calls, and recently rolled out to April $18. 

Total covered call premiums:  $318.81
Total dividend payments (including the forecast February ex-dividend):  $60.00
Total stock gain at $18:  -$40.11
Total, absolute gain on the position:  $338.70
Total, absolute return percentage ($338.70/$10,823.00):  3.13%

Annualized total return percentage (held approx 62 days):  18.42%

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