Tuesday, February 11, 2014

Unwinding SO

Last December I established a position in SO, selling a 41 Feb covered call against 300 shares.  The trade was designed to provide a juicy dividend during the holding period because of a January ex-dividend date.  With the shares well in the money, I unwound the position for a gain on Monday.

In looking back at the position plan for this stock, my results are slightly less than what I had forecast in December.  That is the price of not waiting for the shares to be called away on expiration – it’s usually justified by the act of getting a new position in place quickly after the sale.  Only I am not doing that this time, I am trying to keep about a third of my account in cash reserves until we see where the market is truly headed.

In any case, I exceeded my goal for the trade with an annualized return of over 18 percent - here is the record on the SO position, net of fees and commissions:


Bought 300 shares at an average price of $40.27, total position basis $12,082.00
Sold on unwind 300 shares at $12,400.78. 
Total stock gain:  $318.78

Total options income:   -$12.51 (I exchanged the option premium for additional stock gains in this trade)

Total dividends collected:  $152.25

Net Profit:
Total Net Profit after Unwinding:  $458.52
Absolute Return on Investment: ($458.52/$12,082.00) = 3.80%
Annualized Return (75 days):  3.80%*(365/75) = 18.47%

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