New Positions: KRFT and T

After I unwound the INTC and SBUX positions this month, I decided to further diversify the account and continue to average down the individual position values by staying with 14 positions.  These are risk management strategies – I also decided to maintain my cash reserve at around 20 percent.  So, as the summer begins, I think Rescue My IRA is in a good place to ride out the potential doldrums that always seem to be there at this time of year.

Earlier this month I posted about the first of three new positions:  AAPL.  I added positions in KRFT and T this week, and those are the topics of this post.  The market is rolling along at record highs, and it is a bit of a challenge to find many covered call opportunities that meet my return objectives of 12 percent annualized – I’m solving this by going out a few months so that I can maintain my choices among dividend payers and S&P 4-star selections. 

Here are the details of the two new positions, net of fees, assuming they are called away in the current contract, and including dividends collected through the holding period.

KRFT

Transactions

Bought 100 shares at average share price $59.32 (total $5,932.00)
Sold 1 $60 Sep 2014 for a net of $114.74

Net Profit:

1) Options Income:  = $114.74
2) Dividend Income (July ex-date): $52.50

3) Capital Appreciation if assigned at $60.00:  $50.00

Total Net Profit if assigned and dividend collected:  $215.24
Absolute Return on Investment: ($215.24/$5,932.00) = 3.63%
Annualized Return if Assigned (90 days):  3.63%*(365/90) = 14.72%

T

Transactions

Bought 200 shares at average share price $35.09 (total $7,018.98)
Sold 2 $35 Aug 2014 for a net of $116.49

Net Profit:

1) Options Income:  = $116.49
2) Dividend Income (July ex-date): $92.00

3) Capital Appreciation if assigned at $50.00:  -$36.98

Total Net Profit if assigned and dividend collected:  $171.51
Absolute Return on Investment: ($171.51/$7,018.98) = 2.44%
Annualized Return if Assigned (60 days):  2.44%*(365/60) = 14.86%