Tuesday, April 8, 2014

Unwinding CAT - after 600 Days Held!

I have three transactions I need to post – on Monday I rolled out PFE and FB, and today I unwound CAT.  Since CAT is probably the longest held position in the history of Rescue My IRA, just about 600 days held, I think I will go ahead and post on this transaction first. I’ll post PFE and FB before the end of the week.

CAT was a true “dog of the Dow” for most of 2013, at times I considered dumping it at a loss.  Instead, I decided to manage it intensively, eventually working out a “position recovery plan,” which I posted in February, here:  http://rescuemyira.blogspot.com/2014/02/position-repair-cat.html

Since there was a $2.00 per share bump in the price today, I decided I would go ahead and unwind the position and take the money off the table.  I didn’t hold through the ex-dividend date I forecast for later this month, and I bought to close the $95 May covered call – so my final numbers are a little bit lower than the plan I wrote in February.  Still, the absolute return was over 14 percent, and the annualized calculation works out to almost nine percent – below the goal of 12% annualized, but still a gain, so it’s a win.

I’m going to find a position or two to put these proceeds right back to work.

Here is the final analysis of the CAT trade, net of commissions and fees:


Bought 100 shares in August 2012 at an average price of $87.24, total position basis $8,723.99
Sold on unwind 100 shares at $10,303.27. 
Total stock gain:  $1,579.28

Total options income:   -$643.17 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Total dividends collected:  $336.00

Net Profit:
Total Net Profit after Unwinding:  $1,272.11
Absolute Return on Investment: ($1,272.11/$8,723.99) = 14.58%
Annualized Return (600!!!! days):  14.58%*(365/600) = 8.87%

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