Called Away for the Hat Trick: GM

Just checked into my Scottrade account this morning to have a look at the week ahead.  My GM position was headed for an ex-dividend date of 3/9, and was well in-the-money, so I’m faced with the good news – bad news proposition that a stock I really enjoyed owning has been called away.  I’ll get over it though…GM scored a hat trick for me since I bought it in November, earning returns on covered call premiums, dividends, and a stock gain.

The absolute return on GM was almost $1,000 on the $12,400 invested, or 10.69% over the 140 +/- days I held it.  Sure there are trades that will do better, but that’s probably as good as you could ask for in the stock market.  I’ve got to get to work to find a position or two to replace it with; I’ll post that trade as soon as it is set up.

Meanwhile, here is the final analysis of the GM trade, net of commissions and fees:

GM

Shares:

Bought 300 shares in November 2014, and added another 100 share lot in January.  The total basis was $12,397.99 with an average share price of $30.99.

The position was called away on a $32 strike price, netting $12,782.00, for a total stock gain of $384.01.

Options:

Total options income:   $520.95 – I stated with the $32 strikes in December and was rolling them out monthly.   

Dividend:

Total dividends collected:  $90.00

Net Profit:
Total Net Profit after Unwinding:  $994.96
Absolute Return on Investment: ($994.96/$12,397.99) = 10.69%
Annualized Return (142 days):  10.69%*(365/142) = 27.48%

Called on the ex-date for a Hat Trick: BA

Yesterday, my BA position went ex-dividend and was called away – the stock has had a good run in the new year so far and has traded in-the-money since January.  The call was not unexpected; in fact, since I scored a hat trick with it – earning income from covered call premiums, a dividend payment, and a stock gain – it is one of this year’s Rescue My IRA success stories.

Next steps for me are to put the proceeds back to work, so I’m getting busy with research now.  In the meantime, here’s the final analysis of the BA trade, net of commissions and fees:

BA

Shares:

Bought 100 shares in September 2014 at an average price of $129.37, total position basis $12,937.00.

Sold on unwind 100 shares at $13,500.00. 

Total stock gain:  $545.70

Options:

Total options income:   $141.21 (for the term of this trade, strike prices ranges from $130 to $135)

Dividend:

Total dividends collected:  $73.00

Net Profit:
Total Net Profit after Unwinding:  $759.91
Absolute Return on Investment: ($759.91/$12.937.00) = 5.87%
Annualized Return (140 days):  5.87%*(365/140) = 15.31%

Called Away for the Hat Trick - DIS

In the fall of last year, my thoughts began to turn to that nice annual dividend that DIS pays.  I opened a position in September, but it was very conservative and was quickly called away – the ex-dividend date for this stock is in December.  So I waited a few days until October and opened a new position in DIS, one that was just called away last Friday.

As a matter of fact, that first transaction of the year was a success in another way:  DIS earned me a hat trick, which means I collected covered call premiums, a dividend payment, and there was a capital gain on the sale.  In total, the position earned $381 over the course of 90 days.  That works out to a calculated return of 4.35%, or annualized return of 17.65%.

Here’s the analysis of the DIS position, net of fees and commissions; the position was called away at expiration last week. 

DIS

This was a 100 share position established at $87.59 per share in October 2014, total basis $8,758.99.  During the holding period I sold covered calls at strike prices ranging from $87.50 to $92.50, the final strike price was $90.00.

Total covered call premiums:  $42.72

Total dividend payments (there was a single, annual dividend):  $115.00

Total stock gain at $90:  $223.01

Total, absolute gain on the position:  $380.73

Total, absolute return percentage ($380.73/$8,758.99):  4.35%

Annualized total return percentage (held approx 90 days):  17.65%

Position Repair: CAT

The battery pack on my old Dell laptop died last week, so until I replace it, I’m reconstructing my record spreadsheets and post templates on a borrowed computer. That puts me a little behind the curve on some recent trades, including the one I’ll post about today – a position repair situation on my old CAT shares, and one I’ll post soon about being called away on 200 shares of FB.

As far as the CAT position goes, I established this back in August 2012, making it an exceptionally long-lived trade for Rescue My IRA.  That’s due to the fact that the stock was in decline of most of 2012 – I haven’t checked, but wouldn’t be surprised if it were the dog of the Dow, and not just one of the worst performers of the year. 

Since buying the shares in August 2012, I have sold covered calls at the original $90 strike, have dipped as low as $85, and with the current trade, moved up to a $95 strike.  I count 13 adjustments on the options, and have collected six dividend payouts, with one to go before the current contract expires.  At $95, there will be a share gain, so as things currently stand, if all goes well with this trade, I’ll have a hat trick!

The last adjustment also moved the position into a place where the annualized gain for the period is 10.42%, getting close to my goal of 12%.  The absolute gain is almost 18% - nothing to complain about here, because when I had $85 and $87.50 strikes on CAT the position was going to 5% or 6% annualized.  That’s also why I call this a position repair trade.

Here’s the analysis of the position, net of fees and commissions and assuming I collect the April dividend for CAT.

CAT

This is a 100 share position established at $87.17 per share in August 2012, total basis $8,716.99.

The current covered call is at a $95 strike, but I have sold calls as low as $85 during the holding period.

Total covered call premiums:  $405.86

Total dividend payments (including the forecast April ex-dividend):  $396.00

Total stock gain at $95:  $765.83

Total, absolute gain on the position:  $1,567.69

Total, absolute return percentage ($1,567.69/$8,716.99):  17.98%

Annualized total return percentage (held approx 630 days):  10.42%

Called Away for the Hat Trick: INTC

Even though there was some downward pressure on the stock, INTC finished in the money by more than a buck on Friday, and my shares were called away at the January expiration.  This is the first time in a while I’ve had shares called – I usually can manage to unwind the position a couple of weeks early, and I get the proceeds moved into a new position ASAP, but that didn’t work out for me with my January $24.00 on INTC this time.

No matter.  I had the shares for 90 days and collected covered call premiums, dividends, and stock gains on this one, making it a hat trick.  And the final returns pegged out at 4.92% absolute, and 19.95% annualized – exceeding my goal of 12%.  I can’t complain.

Here is the record on this position, as usual, net of fees and commissions:

INTC

Shares:

Bought 400 shares at an average price of $23.68, total position basis $9,471.00

Shares called away on assignment at $9,582.89, average share price $23.96.

Total stock gain:  $111.89

Options:

Total options income (I rolled the $24.00 strike out three times):  $263.92

Dividend:

Total dividends collected:  $90.00

Net Profit:
1) Stock gains:  $111.89

2) Options income:  $263.92

3) Dividend Income: $90.00

Total Net Profit after Assignment:  $465.81
Absolute Return on Investment: ($465.81/$9,471.00) = 4.92%
Annualized Return (90 days):  4.92%*(365/90) = 19.95%

Unwinding to Close DVN, SPY, and TRV

This evening’s post will have me caught up on my October trades so far.  Besides unwinding my TGT position, which I posted about earlier, I unwound three of my October contracts:  DVN, SPY, and TRV – except in these cases, I closed out all three positions for a gain that exceeded my goal of an annualized 12%return.

It turns out that DVN and TRV were hat tricks, as well – the positions earned income for me from share gains, covered call premiums, and dividends, all three sources.  TRV only barely missed the mark.

Here is the record on the three positions, net of fees and commissions:

DVN

Shares:

Bought 200 shares at an average price of $60.70, total position basis $12,014.80

Sold on unwind 200 shares at $12,230.78, average share price $61.15

Total stock gain:  $215.98

Options:

Total options income:   $279.50

Dividend:

Total dividends collected:  $88.00

Net Profit:
Total Net Profit after Unwinding:  $707.98
Absolute Return on Investment: ($707.98/$12,014.80) = 5.89%
Annualized Return (150 days):  5.89%*(365/150) = 14.34%

SPY

Shares:

Bought 100 shares, position basis $16,845.57

Sold on unwind 100 shares at $17,280.72

Total stock gain:  $435.15

Options:

Total options income:   $117.21

Dividend:

Total dividends collected:  $84.00

Net Profit:
Total Net Profit after Unwinding:  $636.36
Absolute Return on Investment: ($636.36/$16,845.57) = 3.78%
Annualized Return (83 days):  3.78%*(365/83) = 16.61%

TRV

Shares:

Bought 100 shares, position basis $8,210.99

Sold on unwind 100 shares at $8,454.86

Total stock gain:  $243.87

Options:

Total options income:   -$33.02

(The unwind transaction involves buying to close the final covered call contract, and that can mean the income from premiums is minimized – but it is offset by the additional stock gain.)

Dividends:

Total dividends collected:  $50.00

Net Profit:
Total Net Profit after Unwinding:  $260.85
Absolute Return on Investment: ($260.85/$8,210.99) = 3.18%
Annualized Return (65 days):  3.18%*(365/65) = 17.84%

ITW: Closed out at Last

The ITW position is unusual because of how it ended up rolling out.  I established it as a 200 share purchase in March 2012 – I think I might have made that first trade from a hotel room in Fort Worth, in fact.  The share basis was $56.37, so I started out with $57.50 strikes.

Eventually I made the move to $60 strikes, and during December, half of the shares were called away on the ex-dividend date.  I’ve held the remaining shares since then, and they were finally called away from me on the April expiration last Friday.

I held these long enough to collect a full year’s worth of dividends, a good amount of call premiums, and a handsome gain on the shares – a hat trick.  But calculating an annualized return is quirky because of the way the shares were called.  I calculate the return against the total original basis – on ITW it works out to an annualized 13.24%, which is slightly above my goal of 12%. 

If I were to adjust that for the assignment and reduced basis for the last five months I held the shares, I’d probably come out with 14 or 15%.  That’s not bad, so I’m happy in any case.

Here’s the analysis of the ITW position:

ITW

osition basis:  200 Shares, basis $11,274.00, or $56.37 per share; Apr 60 assigned.

Option Premiums:  $606.86

Dividends Collected:  $296.00

Stock Gain:  $691.72

Total:  $1,594.58

Absolute return 14.14%

Annualized return (390 days) 13.24%

Hat Tricks on MRK and UNH

This was a volatile week in the markets, understandable when you consider the bombing attacks in Boston on the negative side and improving hiring news on the positive side.  At one point, it looked as if some of my April contracts, which were well in the money at the beginning of the week, might end up not getting called away.  As it turned out, all three of the contracts in the Rescue My IRA account were assigned, and the one contract in my conventional account was also – today I will write about two of the contracts and my next post will cover the other two.

All of the assigned positions ended up as hat tricks – meaning I collected call premiums, dividends, and stock gains from them.  My goal is to earn a return of about 12% per year in the account, but the two positions I’ll cover in this post are noteworthy because I only held them for 60 days – and the estimated annualized return on them was 30% or better!  Now I will begin the process of investing the proceeds from these contracts, about $30K in the Rescue My IRA account.

Here’s the analysis of the two hat tricks:

UNH

Position basis:  200 Shares, basis $11,125.00, or $55.63 per share; Apr 57.5 assigned.

Option Premiums:  $196.49

Dividends Collected:  $42.50

Stock Gain:  $357.89

Total:  $596.88

Absolute return 5.37%

Annualized return (60 days) 32.64%

MRK

Position basis:  200 Shares, basis $8,521.00, or $42.61 per share; Apr 44 assigned.

Option Premiums:  $72.49

Dividends Collected:  $86.00

Stock Gain:  $261.89

Total:  $420.38

Absolute return 4.93%

Annualized return (60 days) 30.01%

Called Early for the Hat Trick on URS

Earlier this month I wrote about how 200 shares of my URS position had been called away on the ex-dividend date, March 13: I had held a position of 400 shares, and the stock was in the money by more than $5 – and it had remained there ever since.  For the second time during the course of the Rescue My IRA account I had a partial assignment, but that was rectified on Wednesday this week when the remaining 200 shares were called away.  So today’s post will be the close out entry for the URS position, which I held for about 300 days. 

I had purchased the URS shares as a replacement for my legacy holding, ACM.  I had worked at that company and one of the benefits was the ability to purchase shares within your 401(K) – after I was laid off there in 2011 and rolled the account over to Rescue My IRA, I still held 800 shares, which I wrote covered calls against.  For the record, ACM does not meet my stock purchase criteria and I wouldn’t have bought the shares in the first place if it hadn’t been for the extenuating “legacy” circumstance.  Eventually I decided to exit the position, taking the largest loss I ever have had in this account, around $5,000 – or about 25% of the position value.

Still desiring to hold a position in a major construction company, I chose URS, which did meet my selection criteria at the time, and I rolled the ACM proceeds over to a 400 share position.  As the analysis below shows, over the course of the 10 months or so that I held URS, I gained back $1,900 of that loss when the URS shares were called.  

In the end, because I was able to collect a gain on the share price, dividends, and covered call premiums, URS is another hat trick position.  I call that a win for the Rescue My IRA trading plan and a lesson well learned.

Here’s the analysis of the URS position.

URS

Shares:

5/7/2012 Bought 400 shares at $39.55, total position basis $15,827.00 (the largest position to date in this account)

3/2013 Sold on assignment 400 shares at a strike price of $40.00 in two transactions of 200 shares each

Total stock gain:  $138.64

Options:

Total options income (a total of seven contracts):  $1,477.91

Dividend:

Total dividends collected:  $280.00, including dividends on 200 shares from the March 2013 ex-dividend date

Net Profit:
1) Stock gains:  $138.64

2) Options income:  $1,477.91

3) Dividend Income: $280.00

Total Net Profit after Assignment:  $1,896.55
Absolute Return on Investment: ($1,896.55/$15,827.00) = 11.98%
Annualized Return (300 days):  11.98%*(365/300) = 14.58%