After I wrote my to-do
list in the November monthly report, I quickly set out to do a position repair
on the CRUS holding in the Rescue My IRA account. As it was, I had adjusted the strike price
down from $20 to $18.50, and if I had let the stock get called away I would
record a loss on the shares totaling $600.
I decided to roll back up to $20, combined with a roll-out, as a way to
mitigate this risk.
The position doesn’t
meet all the rules of my trading plan, and as a matter of fact, I set it up as
an exception. For example, I typically
look for shares that have a 4-star or better S&P rating, but CRUS was a
3-star stock when I bought it, and I also look for a dividend yield of between
3 and 5% per year, but CRUS doesn’t pay dividends. Then I rolled down to $18.50 because I wanted
to divest the shares after they were no longer rated by S&P.
I’ve come around to not writing the position off after all – the volatility of this stock means there are plenty of covered call
premiums available, enough to meet the yield expectations I have for shares in
this account – 12% annualized. So on
Monday I rolled the shares out from December to March, and up from $18.50 to $20.00.
Here’s the current position
plan for CRUS, net of fees and commissions.
CRUS
This is a 400-share
position established in February 2014 with a basis of $8,038.00, or $20.10 per
share. The current covered call is $20 Mar
2015, I have been selling covered calls with strike prices ranging from $18.50
to $22.00.
Total covered call
premiums: $1,576.28
Total dividend
payments (no dividend on CRUS): $0.00
Total stock loss at $20: -$56.00
Total, absolute gain
on the position: $1,520.28
Total, absolute return
percentage ($1,520.28/$8,038.00): 18.91%
Annualized total
return percentage (approx 375 days if held to expiration): 18.41%
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