I’ve been watching my
WIN position for two months now. I
bought it for the handsome 12% annual dividend and could have been content to
sit with that and let it roll, but since Rescue My IRA uses covered calls to
enhance annual gains, this one can be a laboratory for showing what the
strategy can do.
My contracts on WIN, a
position I started with 1,000 shares and had 100 called away during a past
ex-dividend date, were all written with an $8 strike. The position rolled on up to $9, so I decided
to work on a roll-up strategy. Unfortunately,
it is a low-volatility stock and the premiums made this a challenge, so when I
finally pulled the trigger on the adjustment trade I had to go to back months,
rolling up to the $9 strike and a November contract.
The transaction
required my to trade my call premiums to offset the increased stock gains, but
it also means I will likely collect two more quarterly dividend payments along
with the gain on the position. The
calculations show an estimated annualized gain of nearly 16% when all is said
and done, assuming that the stock is called away in November and I collect the
dividends until then.
Here’s the analysis of
the WIN position, net of fees and commissions.
WIN
This started out as a
1,000-share position with a basis of $8,117.00, or $8.12 per share. I started selling the $8 strike and rolled-up
to a $9 strike with the recent transaction.
One 100-share lot was called away previously at $8.00.
Total covered call
premiums: -$392.01
Total dividend
payments through November: $525.00
Total stock gain at $9: $757.00
Total, absolute gain
on the position: $889.99
Total, absolute return
percentage ($889.99/$8,117.00): 10.96%
Annualized total
return percentage (held approx 255 days): 15.69%
