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.
Wednesday, May 13, 2015
When I picked FCX for a trade last
month, I knew I was choosing a stock with a lot of volatility, as well as one
that gets a lot of talk in various forums.
These facts define shares that I would normally not deal with in Rescue
My IRA, but I did have the capital at the time and the potential profit on the
trade seemed to offset the risks of a short-term position, so I bought 500
shares and sold covered calls against them.
I was able to unwind the position for a good profit in early May, after a
six week holding period.
Here is the final analysis of the FCX
trade, net of commissions and fees:
Bought 500 shares in March 2015. The total basis was $9,467.00 with an average
share price of $18.93.
I unwound the position in early May
at an average price of $23.84, for a total gain of $2,450.74
Total options income: -$1,527.92
– as is often the case on unwind trades, I traded option premiums for stock
Total dividends collected: $25.00
Total Net Profit after Unwinding: $947.82
Absolute Return on Investment: ($947.82/$9,467.00) = 10.01%
Annualized Return (45 days): 10.01%*(365/40) = 81.21%