Thursday, April 10, 2014

Rolling Out PFE

There are two transactions still to report after my trading activities in Rescue My IRA this week:  rolling out PFE, which I’ll post today, and a roll-out on FB, which will follow.

Since the market has been trading sideways for most of the month of April, there haven’t been a lot of opportunities to adjust existing positions.  However, PFE did have a drop earlier this week, and the stock price approached the $31 strike price on my April covered call.  Rather than waiting to see if this would mean the option simply expired, I decided to do a roll-out to get a little more cash back in option premiums, and by doing so, I extended past the May ex-dividend date, putting that payment in play as well.

Now, the shares remain in the money, and the current price is far enough above the $31 strike that my call could be assigned and the holder of that contract would make a profit – so I’m considering this a probable early assignment.  If I manage to hold the shares through the current contract and collect the dividend, my annualized return is just more than 13%, as shown below.  If not, which is likely, the holding period will be shortened by ten days, and the returns go down to just less than 12% - that is close enough for me to count this one as a success, since my goal on these positions is 12% annualized.

Here’s the analysis of the PFE position, net of fees and commissions, and assuming I collect the May ex-dividend. 


This is a 300-share position with a basis of $9,263.00, or $30.88 per share.  I have been selling $31 strikes on the shares.

Total covered call premiums:  $276.73
Total dividend payments (including May):  $156.00
Total stock gain at $31:  $19.00
Total, absolute gain on the position:  $451.93
Total, absolute return percentage ($451.93/$9,263.00):  4.88%

Annualized total return percentage (held approx 135 days):  13.19%

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