I have had two goals
in the Rescue My IRA account this year – the first has been to maintain more
cash on reserve, with my current goal set at 20% of the account value, and the
second is to further diversify by maintaining between 12 and 15 positions with
an average value of less than $10,000.
With the KO position
unwound, I set out to identify a new position on line with these objectives immediately,
so that I could get the money back to work.
I’ve mentioned the
selection criteria I am using these days in passing in earlier posts: stock choices must be rated 4- or 5-stars by
S&P, they need to pay a dividend of between 3% and 5% annually, and I need
to be able to forecast a 12% annualized return, comprised of option premiums,
dividend payments, and stock gains, with the first transaction.
Actually, I identified
two new positions that met these criteria:
CNP and TGT. After I’d established
the new positions, Rescue My IRA has 15 positions in play, and the cash reserve
is steady at 25%. I’m ready to ride out
the summer, and the account should be able to hold its own for the balance of
the year.
Here are summaries of
the position plans for each of the two new positions, net of commissions and
fees.
CNP
Transactions
Transactions
Bought 300 shares at average share
price $24.70 (total $7,411.00)
Sold 3 $25 Aug 2014 covered calls
Sold 3 $25 Aug 2014 covered calls
Net Profit:
1) Options Income: = $184.24
2) Dividend Income (August ex-dividend): $71.25
3) Capital Appreciation if assigned at $25.00: $71.00
1) Options Income: = $184.24
2) Dividend Income (August ex-dividend): $71.25
3) Capital Appreciation if assigned at $25.00: $71.00
Total Net Profit if assigned and dividend collected: $326.49
Absolute Return on Investment: ($326.49/$7,411.00) = 4.41%
Annualized Return if Assigned and Dividend Collected (60 days): 4.41%*(365/60) = 26.80%
TGT
Transactions
Transactions
Bought 100 shares at share price $58.40
(total $5,839.99)
Sold $58.50 Aug wk 1 2014 covered call
Sold $58.50 Aug wk 1 2014 covered call
Net Profit:
1) Options Income: = $98.74
2) Dividend Income (August ex-dividend): $52.00
3) Capital Appreciation if assigned at $58.50: -$7.99
1) Options Income: = $98.74
2) Dividend Income (August ex-dividend): $52.00
3) Capital Appreciation if assigned at $58.50: -$7.99
Total Net Profit if assigned and dividend collected: $142.75
Absolute Return on Investment: ($142.75/$5,839.99) = 2.44%
Annualized Return if Assigned and Dividend Collected (45 days): 2.44%*(365/45) = 19.83%
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