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%