Three New Positions: ABBV, F, and FCX

Halfway through the month of March, I decided that it was time to get a little bit more of the resources available in Rescue My IRA back to work in the market.  I have been maintaining the cash reserve within a range of 20-30% of the account value, and my strategy became to work on getting this down to about 15%. 

At first I pulled the trigger with two stock purchases and subsequent covered call sales – ABBV and KRFT.  As I wrote last week, KRFT was called away due to the recent merger news; but additionally, I had a number of trades that were likely to be called at expiration, so I went ahead and established two more positions:  F and FCX.  For a short time I had 16 positions in play, right at the top of my preference, which is to have between 12 and 16 active trades in the portfolio at any given time.

There’s no real logic behind that number except for the fact that I don’t feel that I have enough time to manage more positions than 16.  Subsequent to the KRFT call I have been looking for a replacement, but that is likely to take some time, and I may just do a few add-ons to existing trades instead of buying a new stock.

In order to catch the blog up on the ABBV, F, and FCX trades, here are the position plans, net of commissions and fees.  All three of these trades exceed my goal of 12% annualized returns – but FCX is something of a volatile high-flyer, so that trade could do somewhat better.  Time will tell.

ABBV

Transactions

Bought 100 shares at a basis of $6,149.99, for an average share price of $61.50.

Sold 1 $62.50 Apr 2015 covered call for $91.75

Net Profit:

1) Options Income:  = $91.75
2) Dividend Income (Apr ex-dividend, if collected): $51.00
3) Capital Appreciation if assigned at $62.50:  $82.01

Total Net Profit if assigned:  $224.76
Absolute Return on Investment: ($224.76/$6,149.99) = 3.65%
Annualized Return if Assigned and Dividend Collected (30 days):  3.65%*(365/30) = 44.46%

F

Transactions

Bought 500 shares at a basis of $8,292.00, for an average share price of $16.58.

Sold 5 $17.00 May 2015 covered call for $121.74

Net Profit:

1) Options Income:  = $121.74
2) Dividend Income (Apr ex-dividend, if collected): $75.00
3) Capital Appreciation if assigned at $17.00:  $190.00

Total Net Profit if assigned:  $386.74
Absolute Return on Investment: ($386.74/$8,292.00) = 4.66%
Annualized Return if Assigned and Dividend Collected (50 days):  4.66%*(365/50) = 34.05%

FCX

Transactions

Bought 500 shares at a basis of $9,467.00, for an average share price of $18.93.

Sold 5 $20.00 Apr 2015 covered call for $211.84

Net Profit:

1) Options Income:  = $211.84
2) Dividend Income (Apr ex-dividend, if collected): $156.25
3) Capital Appreciation if assigned at $20.00:  $515.00

Total Net Profit if assigned:  $883.09
Absolute Return on Investment: ($883.09/$9,467.00) = 9.33%
Annualized Return if Assigned and Dividend Collected (30 days):  9.33%*(365/30) = 113.49%