Diversion

Monday, April 7, 2014

Two New Positions: INTC and MAT

Since adopting my recent cash reserve strategy, where I am holding about a third of the Rescue My IRA value in cash pending a market correction or clear sign of surging ahead, I’ve only managed to keep nine or 10 stock positions going.  My preference is to have 12 to 16, it’s my sense of what is the correct amount of risk reducing diversity in my portfolio.  Acting on this hypothesis, I took the proceeds of my recent GLW unwind transaction, and some residual cash that was at rest in the account, and opened positions with INTC and MAT.

Both are stocks I’ve held before in the account.  I opened May contracts for them – there are now six covered calls with May expirations in Rescue My IRA!  So that will be a busy month.

Here are the position plans for these shares – net of fees and commissions.

INTC

Transactions

Bought 300 shares at average share price $26.57 (total $7,972.00)
Sold 3 27 May 2014 covered calls for $127.24

Net Profit:

1) Options Income:  = $127.24
2) Dividend Income (May 5 ex-date): $67.50
3) Capital Appreciation if assigned at $27.00:  $110.00

Total Net Profit if assigned and dividend collected:  $304.74
Absolute Return on Investment: ($304.74/$7,972.00) = 3.82%
Annualized Return if Assigned (43 days):  3.82%*(365/43) = 32.45%

MAT

Transactions

Bought 200 shares at average share price $40.18 (total $8,036.00)
Sold 2 40 May 2014 covered calls for $280.48

Net Profit:

1) Options Income:  = $280.48
2) Dividend Income (May ex-date, but since I sold an in-the-money call, I’m not including it in the plan): $0
3) Capital Appreciation if assigned at $40.00:  -$54.00


Total Net Profit if assigned and dividend collected:  $226.48
Absolute Return on Investment: ($226.48/$8,036.00) = 2.82%
Annualized Return if Assigned (44 days):  2.82%*(365/44) = 23.38%

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