Wednesday, December 3, 2014

Position Repair: CRUS

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.


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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