It’s probably been a
couple of years since I decided to cut my losses on a covered call position,
but I recently did just that on my WIN position. I did well with two WIN trades in 2014, so I
thought I might just return to the well for another go – the stock has typically
had a great dividend, and it traded in a narrow range that set up a nice
roll-out strategy. That’s not how it
worked out this time, however.
I should have done a
better job with due diligence, which would have red flagged the stock for me. A planned
split had been announced for the shares, with many assets being spun out into a
real estate investment trust, or REIT.
Holders of WIN shares would receive shares in the new REIT, but a
dividend cut was also planned.
All these unknowns
made me increasingly uncomfortable with the choice of WIN, so I started making
plans to unwind my covered call trade early this month. I did collect a dividend along the way, so
even though I knew I’d take a loss there were some premiums and the dividend to
soften the blow.
Still there was a net
loss on the trade of about $1,000, or -13%.
That’s going to happen in a portfolio from time to time, which doesn’t
make it any more fun, but it is the reason I keep between 12 and 15 trades
going at any given time, and I’ve already reinvested the proceeds. For the most part, my trades hit the mark of
a 12% return annualized, so this one will be easily made up, probably will be
made up for during the month of January, as a matter of fact!
Here are the final
results of this most recent WIN trade, as always, net of commissions and fees:
WIN
Transactions
Transactions
Bought 800 shares in late November
with an average share price of $9.85 (total $7,879.00)
I sold covered calls at a $10 strike price for the duration of this position.
I sold covered calls at a $10 strike price for the duration of this position.
Net Loss:
1) Options Income: = $109.00
2) Dividend Income (December): $200.0-
3) Capital Loss when unwound at $8.14 per share: -$1,363.15
1) Options Income: = $109.00
2) Dividend Income (December): $200.0-
3) Capital Loss when unwound at $8.14 per share: -$1,363.15
Total net loss on the unwound position: -$1,054.14
Absolute Return on Investment: -$1,054.14/$7,879.00) = 13.38%
Annualized Return not calculated due to net loss status of the position.