Like many of my generational colleagues, the baby boomers, I've found that my best intentions about saving for retirement aren't always meeting the mark. In 2011, I took some old 401(k) accounts and combined them into a self-directed IRA with Scottrade, and established a strategy of using covered calls to stabilize and enhance my returns. Rescue My IRA chronicles the progress of my IRA rescue using this approach.
Monday, March 23, 2015
Called Away on CRUS - 18%+ Annualized Return!
At expiration last Saturday, I had
two positions called away for a profit:
CRUS and DOW. Normally, I would
make a combined post on these transactions, but I am short of time this morning
and will only write about the CRUS trade – I’ll update on DOW tomorrow morning.
CRUS was a little bit of a flyer
when I selected it last year – it has consistently been rated as 3 stars by
S&P, where I typically work with 4 stars stocks, and it pays no dividend,
which is a second key criteria within Rescue My IRA. Other than that, solely by selling covered calls I was able to generate a
very respectable yield of more than 18% for the holding period (absolute
return), and better than 18% annualized, which exceeds my goal of a 12%
annualized return, and then some.
Here is the final analysis of the CRUS
trade, net of commissions and fees:
Bought 400 shares in February 2014,
for a total basis was $8,038.00 with an average share price of $20.10.
The position was called away on a $20
strike price in March 2015, netting $7,982.00, for a total stock gain of -$56.00.
Total options income: $1,576.28
– I sold $20 covered calls on a monthly basis through most of the holding
period, with one transaction at the $18.50 strike.
Total dividends collected: $00.00
– CRUS does not pay dividends.
Total Net Profit after call: $1,520.28
Absolute Return on Investment: ($1,520.28/$8,038.00) = 18.91%
Annualized Return (375 days): 18.91%*(365/375) = 18.41%