Wednesday, March 12, 2014
Two Roll-outs: CRUS and KO
Despite losing so much of my portfolio data when my old laptop crashed, I’ve continued trading activities. I’ve got three posts queued up beginning with this one today – two roll-outs, including a position repair on KO; unwinding a March contract; and establishing two new positions – I’ll start with the roll-out post today.
Of the two positions, one is faring well – CRUS, even though it is something of a rule breaker in Rescue My IRA, since it doesn’t pay a dividend and it is not even ranked by S&P. That makes it quite a bit more speculative than most stocks I pick for this account.
The second position is KO, a gem of a stock that is always held in high regard. The company is going through transition struggles right now, and it has been an underperformer for Rescue My IRA. Despite this, I decided to roll it out to a strike price that keeps me from losing money on it, even though it will not meet my goal of a 12% annualized return for positions in the account.
Here’s the analysis of the two positions, net of fees and commissions, and assuming I collect dividends through the holding periods.
This is a 400-share position with a basis of $8,038.00, or $20.10 per share. I have been selling $20 strikes and rolling them monthly.
Total covered call premiums: $648.42
Total dividend payments (no dividend): $0.00
Total stock gain at $20: -$56.00
Total, absolute gain on the position: $592.42
Total, absolute return percentage ($592.43/$8,038.00): 7.37%
Annualized total return percentage (held approx 105 days): 25.62%
This is a 400-share position with a basis of $16,142.96, or $40.36 per share. Since last July, I have been selling covered calls ranging from $38 to $40, and have mostly been out of the money while the stock flounders. I decided to stay in and minimize stock losses, so this trade rolled out and up from a $38 to an Aug $39 strike – also ensuring I captured the March ex-dividend. If I get another chance for a roll-out, I’ll take it up to a $40 strike.
Total covered call premiums: $937.36
Total dividend payments (forecast March and June ex-dividends): $448.00
Total stock gain at $39: -$560.96
Total, absolute gain on the position: $824.40
Total, absolute return percentage ($824.40/$16,142.00): 5.11%
Annualized total return percentage (held approx 365 days): 5.11%