Four Unwinds! AIG, HPQ, IP, and TGT

So I am way behind on posting transactions here – I wanted to do better in November but it didn’t work out.  I’ll partly make it up with a couple of posts here – first a summary of the four “unwind” transactions I completed this month, and second, a note about the two new positions I started this month.  Then, of course, there will be the wrap up post for the end of the month, probably early next week.

The four positions I unwound this month included (in alphabetical order) AIG, HPQ, IP, and TGT.  As a matter of fact, two of them – AIG and HPQ – were trades of less than an month in duration, and it’s quite possible that the HPQ trade was the best annualized return I’ve made since I started the Rescue My IRA account.  More on that later, after a quick recount of how and when I might typically unwind a position.

Generally speaking, anytime the delta on one of my covered calls reaches 1.00, I will consider a trade if I can buy to close the option and sell for a capital gain.  While these transactions typically mean I’ll lose a little cash in total returns (usually averaging $10-$30 per lot of 100 shares), there is an offset from a reduced commission fee (Scottrade charges $18 for settling option trades versus $7 for a user initiated trade), and usually I can get the funds back to work right away, generating new returns from covered call premiums to offset that.  Plus, I generally have enough action going on in the account not to worry about these small amounts.

Here is the final analysis of the four trades, net of commissions and fees, listed in alphabetical order:

AIG

Shares:

Bought 200 shares in early November at an average price of $53.83, total position basis $10,765.00.

Sold on unwind 200 shares at $10,962.75. 

Total stock gain:  $197.75

Options:

Total options income:   -$109.01 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:

Total dividends collected:  $0.00 (I completed this trade before the December ex-dividend date)

Net Profit:
Total Net Profit after Unwinding:  $88.74
Absolute Return on Investment: ($88.74/$10,765.00) = 0.82%
Annualized Return (15 days):  0.82%*(365/15) = 20.06%

HPQ

Shares:

Bought 200 shares in mid-November at an average price of $37.25, total position basis $7,449.00.

Sold on unwind 200 shares at $7,824.00. 

Total stock gain:  $375.82

Options:

Total options income:   -$265.02 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:

Total dividends collected:  $0.00

Net Profit:
Total Net Profit after Unwinding:  $110.80
Absolute Return on Investment: ($110.80/$7,824.00) = 1.49%
Annualized Return (5 days):  1.49%*(365/5) = 108.58%

IP

Shares:

Bought 200 shares in May 2013 at an average price of $47.96, total position basis $9,592.00.

Sold on unwind 200 shares at $10,450.76. 

Total stock gain:  $858.76

Options:

Total options income:  $123.77 (By unwinding, I exchanged most of the option premium for additional stock gains in this trade)

Dividend:

Total dividends collected:  $400.00

Net Profit:
Total Net Profit after Unwinding:  $1,382.53
Absolute Return on Investment: ($1,382.53/$9,592.00) = 14.41%
Annualized Return (570 days!!!):  14.41%*(365/570) = 9.23%

TGT

Shares:

Bought 100 shares in June 2014 at an average price of $58.40, total position basis $5,839.99.

Sold on unwind 100 shares at $6,411.26. 

Total stock gain:  $571.21

Options:

Total options income:  -$482.53 (By unwinding, I exchanged the option premium for additional stock gains in this trade)

Dividend:

Total dividends collected:  $52.00

Net Profit:
Total Net Profit after Unwinding:  $140.74
Absolute Return on Investment: ($140.74/$5,839.99) = 2.41%
Annualized Return (90days):  2.41%*(365/90) = 9.77 %