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.
Tuesday, March 24, 2015
Called Away on DOW
This is the second of two posts about the
CRUS and DOW positions, which were both called away last Saturday on expiration
of their March covered calls. As with
CRUS -the topic of yesterday's post here, the DOW trade proved to be a good one for Rescue My IRA, generating an
absolute return of 3.38% over the 45-day holding period, for an annualized
return of 27.39%. Rescue My IRA sets up
these trades with the goal of generating a 12% annualized return, so between
the 18% for CRUS and 27% for DOW, the account is on a streak!
In any case, let’s move ahead for a
look at the final analysis of the DOW trade, net of commissions and fees:
Bought 200 shares in January 2015,
for a total basis of $9,047.00 and an average share price of $45.24. The position was called away at expiration on
a $45.00 strike price, netting $8.982.00, for a small capital loss of $65.00.
Total options income: $370.48
– there was only one covered call contract written for the duration of this
Total dividends collected: $00.00
– these shares were called away before the ex-dividend date.
Total Net Profit after Unwinding: $305.48
Absolute Return on Investment: ($305.48/$9,047.00) = 3.38%
Annualized Return (45 days): 3.38%*(365/45) = 27.39%