Position Repair: CRUS

After I wrote my to-do list in the November monthly report, I quickly set out to do a position repair on the CRUS holding in the Rescue My IRA account.  As it was, I had adjusted the strike price down from $20 to $18.50, and if I had let the stock get called away I would record a loss on the shares totaling $600.  I decided to roll back up to $20, combined with a roll-out, as a way to mitigate this risk.

The position doesn’t meet all the rules of my trading plan, and as a matter of fact, I set it up as an exception.  For example, I typically look for shares that have a 4-star or better S&P rating, but CRUS was a 3-star stock when I bought it, and I also look for a dividend yield of between 3 and 5% per year, but CRUS doesn’t pay dividends.  Then I rolled down to $18.50 because I wanted to divest the shares after they were no longer rated by S&P. 

I’ve come around to not writing the position off after all – the volatility of this stock means there are plenty of covered call premiums available, enough to meet the yield expectations I have for shares in this account – 12% annualized.  So on Monday I rolled the shares out from December to March, and up from $18.50 to $20.00.

Here’s the current position plan for CRUS, net of fees and commissions.

CRUS

This is a 400-share position established in February 2014 with a basis of $8,038.00, or $20.10 per share.  The current covered call is $20 Mar 2015, I have been selling covered calls with strike prices ranging from $18.50 to $22.00.

Total covered call premiums:  $1,576.28

Total dividend payments (no dividend on CRUS):  $0.00

Total stock loss at $20:  -$56.00

Total, absolute gain on the position:  $1,520.28

Total, absolute return percentage ($1,520.28/$8,038.00):  18.91%

Annualized total return percentage (approx 375 days if held to expiration):  18.41%

Rolling up and out BA and DIS

This month I have adjusted a couple of positions in Rescue My IRA.  I guess that’s a bullish move, and I can live with that.  Today, I’ll post about rolling BA and DIS up and out.    

I established the DIS covered call trade earlier in November – setting sights on the annual dividend payment in December.  The stock has moved past my strike price with time left on the clock, the company has been on a growth curve, and no less than five friends have recently told me they are taking their families to Disney World in Orlando for a week or more this quarter.  So I’m on board with a roll up on this one.

On BA, similarly – this is a stock I’ve held a few times in the past.  It seems like there is a lot of macro effect in the economy that will lead this great American company to growth, so I am rolling it up. 

Rescue My IRA has a few years to go before I start to use it as a source of retirement income.  I feel like I have to make strategic decisions like these for time to time for the long term.  Three years in, I’m not worried about mistakes so much anymore, because I know how to manage them back.

But I do feel good about these trades.  Here are the details, net of commissions and fees, and assuming I hold the shares through upcoming ex-dividend dates.

BA

This is a 100-share position established in September 2014 with a basis of $129.37 per share.  I have been selling monthly $130 strikes and rolling them out, but this transaction raised the strike to $135 and rolled out to February. 

Total covered call premiums:  $141.21

Total dividend payments (assumes I collect February):  $146.00

Total stock gain at $135:  $545.00

Total, absolute gain on the position:  $832.21

Total, absolute return percentage ($832.21/$12,370.00):  6.43%

Annualized total return percentage (approx 150 days if held to expiration):  15.65%

DIS

This is a 100-share position established in late October 2014 with a basis of $87.59 per share.  As I mentioned above, I bought this one to set up a dividend play, since the stock pays an annual dividend in December.  Besides that, I grew up in Orlando and have pretty much always loved the company.  This trade is based on the assumption the stock will continue to climb after the December 2014 ex-date.

Total covered call premiums:  -$70.77 (I gave up this return based on the roll up)

Total dividend payments (forecast December ex-dividend):  $86.00

Total stock gain at $92.50:  $473.01

Total, absolute gain on the position:  $488.24

Total, absolute return percentage ($488.24/$8,758.99):  5.57%

Annualized total return percentage (held approx. 90 days):  22.61%

Sensitivity analysis suggests that if the stock is not called away at the $92.50 strike, I will roll out again – and might roll down to adjust.  The $90 strike is profitable, and the $87.50 is close, so between the dividend and the additional call premium, this position would remain in pretty good shape.  

Adjusting BA, COP, and CRUS

I was traveling last week on September 30 and didn’t have the chance to check my account values at the market close – so my monthly status report will have to wait until I get my statement in a few days.  In the meantime, the market kept trading, and we had a volatile day or two.  I used the down day on Thursday to make some adjustments to a few positions – BA, COP, and CRUS – which all had Oct covered calls written against them. 

In BA’s case, I rolled out from the 130 Oct to the 130 Nov, and netted $129.  For COP, I rolled out from Oct to Jan – the sector is getting beaten down a bit, so I had to go further out on this transaction – netting $75.  Finally, with CRUS, I rolled out from Oct to Nov and netted $200. 

One of my goals with Rescue My IRA is to use covered calls to make money in down markets as well as up markets…which is exactly what happened on this trading day!

Here are the position plans for BA, COP, and CRUS after the most recent trades, as always net of fees and commissions and assuming I collect dividends through the holding period:

BA

This is a 100-share position with a basis of $12,937.00, or $129.37 per share.  The current covered call is $130 Nov 2014, I opened the position in September with the $130 Oct. 

Total covered call premiums:  $287.23

Total dividend payments (assumes I collect November):  $73.00

Total stock gain at $130:  $45.00

Total, absolute gain on the position:  $405.23

Total, absolute return percentage ($405.23/$12,937.00):  3.13%

Annualized total return percentage (approx 60 days if held to expiration):  19.06%

COP

This is a 100-share position with a basis of $8,050.00, or $80.51 per share.  I started by selling $80 covered calls, in the money, with the intention of having a short holding period.  Thursday’s dip gave me a chance to roll out the October contract, so I did.

Total covered call premiums:  $225.23

Total dividend payments (forecast October and January 2015 ex-dividends):  $146.00

Total stock gain at $80:  -$68.99

Total, absolute gain on the position:  $302.24

Total, absolute return percentage ($302.24/$8,050.00):  3.75%

Annualized total return percentage (held approx 120 days):  11.42%

CRUS

This is a 400-share position, established in February 2014, with a basis of $8,038.00, or $20.10 per share.  I started by selling $20 covered calls, in the money, but have gradually rolled up to $22 covered calls.  I’ve also been able to roll this position out on a monthly basis and it has been a rewarding experience so far.

Total covered call premiums:  $1,000.333

Total dividend payments (no dividend on this stock):  $0.00

Total stock gain at $22:  $744.00

Total, absolute gain on the position:  $1,744.33

Total, absolute return percentage ($1,744.33/$8,038.00):  21.70%

Annualized total return percentage (held approx 270 days):  29.34%

I am very happy with the returns to date on CRUS, but should note that it is a position that does not meet my usual criteria for a Rescue My IRA trade – it is a 3-star stock with S&P and doesn’t pay dividends.  Still, things are working out, but it is definitely an exception to my rules.

AAPL: Rolling out and up

Last week I adjusted my AAPL position – there was some volatility when one of the competitors announced a new product, so I rolled the position out and up when the shares took a one-day hit.  That is the second roll-up I have done since acquiring these shares in June, I’ve written covered calls on the 100-share position at strikes of $95, $97.50, and now $100.00.

If the shares are called away early on their October ex-dividend date or at November expiration, I will have held them either 150 days or 180 days and generated an absolute return of more than 10% - I can live with that.

Here’s the position plan for AAPL, net of fees and commissions, and assuming I collect dividends through the holding period:

AAPL

This is a 100-share position with a basis of $9,380.99, or $93.81 per share.  The current covered call is $100 Nov 2014 but I started in May 2014 with a $95 strike.

Total covered call premiums:  $269.94

Total dividend payments (assumes I collect November):  $94.00

Total stock gain at $100:  $601.01

Total, absolute gain on the position:  $964.95

Total, absolute return percentage ($964.95/$9,380.99):  10.29%

Annualized total return percentage (approx 180 days if held to expiration):  20.86%

Sensitivity analysis shows that if the shares are called early on the October ex-dividend date, the absolute gain percentage drops to 9.79%, but the annualized gain goes up to 23.81%, due to the shorter holding period.

TGT: Rolling Up and Out

This may be the only time I ever posted three trades in a row where I was doing the same kind of adjustment on the positions.  On Thursday, I took advantage of the market hiccup to roll my TGT position out a month and up a strike price, just as I did earlier in the week for AAPL and IP. 

I moved the TGT contract from an August weekly at a strike price of $58.50 out to the regular September contract at a strike price of $60.  The trade was nearly a breakeven on premiums, setting me back about $7 in covered call premiums given up, but I’ve assured myself of a chance to receive the August dividend, and I have added the possibility of $1.50 per share in stock gains.  Plus, the estimated annual return is almost 24% for a two month trade – double my goal of 12% annualized.

Here’s the analysis of the TGT position as of this most recent trade, net of fees and commissions, and assuming I collect dividends through the holding period.

TGT

This is a 100-share position with a basis of $5,839.99, or $58.40 per share.  I set the position up to trade weeklies, but this trade rolled it out to a monthly basis.

Total covered call premiums:  $92.23

Total dividend payments (August ex-dividend):  $52.00

Total stock gain at $60:  $142.01

Total, absolute gain on the position:  $286.24

Total, absolute return percentage ($286.24/$5,839.99):  4.90%

Annualized total return percentage (held approx 75 days):  23.85%

IP: Rolling Out and Up

There was an unusual distribution on my IP shares – they spun off a part of the company and received some cash.  All of that led to an extra dividend in the form of three shares on my 200-share position, and a small amount of cash.  Making it that much more complex was the adjustment to the covered calls I’d written – I had to hold all of those items until expiration.

I resolved to streamline the position by rolling out and rolling up, and put the strategy into action as soon as regular options became available again.  I was able to buy to close the adjusted July $49 option, sell the three shares of the new company, and sell the August $50 option with a net cost of four bucks, improving my total returns to nearly 12% annualized in the process.

Pretty complication transaction all in all, but sometimes that is the way it is.   

Here’s the analysis of the total return on the IP position to date, net of fees and commissions, and assuming I collect dividends through the holding period.

IP

This is a 200-share position established in May 2013, with a basis of $9,592.00, or $47.96 per share.  I have sold strikes ranging from $47 to $50 and rolling them monthly during the holding period.

Total covered call premiums:  $583.38

Total dividend payments (includes the spun-off shares):  $428.08

Total stock gain at $50:  $390.00

Total, absolute gain on the position:  $1,401.46

Total, absolute return percentage ($1,401.46/$9,592.00):  14.61%

Annualized total return percentage (held approx 455 days):  11.72%

AAPL - Rolling Out and Up

Last week I rolled the AAPL position out from August to September, and up from a $95 strike price to a $97.50 strike price.  When I established the position back in June, I expected that I would just work with it on weeklies and then have the position called away quickly, but it has turned out to be more of a mid-term opportunity, now forecast to run three months or so.

And that’s okay by me – if the position goes the distance to the September contract, it will wind up as a hat trick, with earnings from call premiums, dividends, and a stock gain.  It also will have generated a 6% return over just about 90 days, which works out to 26% annualized – far exceeding my goals for a 12% annualized return.

Here’s the analysis of the position, net of fees and commissions, and assuming I collect dividends through the September expiration.

AAPL

This is a 100-share position acquired post-split, with a basis of $9,380.99, or $93.81 per share.  I was selling $95 strikes and rolling them weekly, then monthly, before the roll-up to $97.50.

Total covered call premiums:  $211.46

Total dividend payments (August ex-dividend):  $47.00

Total stock gain at $97.50:  $351.01

Total, absolute gain on the position:  $609.47

Total, absolute return percentage ($609.47/$9,380.99):  6.50%

Annualized total return percentage (held approx 91 days):  26.06%

Rolling WIN Out and Up

I’ve been watching my WIN position for two months now.  I bought it for the handsome 12% annual dividend and could have been content to sit with that and let it roll, but since Rescue My IRA uses covered calls to enhance annual gains, this one can be a laboratory for showing what the strategy can do.

My contracts on WIN, a position I started with 1,000 shares and had 100 called away during a past ex-dividend date, were all written with an $8 strike.  The position rolled on up to $9, so I decided to work on a roll-up strategy.  Unfortunately, it is a low-volatility stock and the premiums made this a challenge, so when I finally pulled the trigger on the adjustment trade I had to go to back months, rolling up to the $9 strike and a November contract.

The transaction required my to trade my call premiums to offset the increased stock gains, but it also means I will likely collect two more quarterly dividend payments along with the gain on the position.  The calculations show an estimated annualized gain of nearly 16% when all is said and done, assuming that the stock is called away in November and I collect the dividends until then.

Here’s the analysis of the WIN position, net of fees and commissions. 

WIN

This started out as a 1,000-share position with a basis of $8,117.00, or $8.12 per share.  I started selling the $8 strike and rolled-up to a $9 strike with the recent transaction.  One 100-share lot was called away previously at $8.00.  

Total covered call premiums:  -$392.01

Total dividend payments through November:  $525.00

Total stock gain at $9:  $757.00

Total, absolute gain on the position:  $889.99

Total, absolute return percentage ($889.99/$8,117.00):  10.96%

Annualized total return percentage (held approx 255 days):  15.69%

IP - Rolling Out and Up

I’m still rebuilding my portfolio data, which was lost when my old laptop crashed.  Just rebuilt the proforma spreadsheet for IP, which I rolled out and up last week – so here is an adjustment post about that transaction.

I’ve traded in and out of IP since the beginning of Rescue My IRA.  My current position is the longest I’ve held any contract on these shares.  IP has been bumping along at the top of its trading range, and its failure to break through to a new high has meant I have ended up holding it for the long haul.

Here’s the analysis of the position, net of fees and commissions, and assuming I collect dividends through the holding period.

IP

This is a 200-share position with a basis of $9,592.00, or $47.96 per share.  I have been selling strikes between $47 and $49 strikes and rolling them monthly; the current contract expires in July 2014.

Total covered call premiums:  $684.40

Total dividend payments:  $330.00

Total stock gain at $49:  $190.00

 Total, absolute gain on the position:  $1,204.40

Total, absolute return percentage ($1,204.40/$9,592.00):  12.56%

Annualized total return percentage (held approx 425 days):  10.78%

Two Roll-outs: CRUS and KO

Despite losing so much of my portfolio data when my old laptop crashed, I’ve continued trading activities.  I’ve got three posts queued up beginning with this one today – two roll-outs, including a position repair on KO; unwinding a March contract; and establishing two new positions – I’ll start with the roll-out post today.

Of the two positions, one is faring well – CRUS, even though it is something of a rule breaker in Rescue My IRA, since it doesn’t pay a dividend and it is not even ranked by S&P.  That makes it quite a bit more speculative than most stocks I pick for this account.

The second position is KO, a gem of a stock that is always held in high regard.  The company is going through transition struggles right now, and it has been an underperformer for Rescue My IRA.  Despite this, I decided to roll it out to a strike price that keeps me from losing money on it, even though it will not meet my goal of a 12% annualized return for positions in the account.

Here’s the analysis of the two positions, net of fees and commissions, and assuming I collect dividends through the holding periods.

CRUS

This is a 400-share position with a basis of $8,038.00, or $20.10 per share.  I have been selling $20 strikes and rolling them monthly.

Total covered call premiums:  $648.42

Total dividend payments (no dividend):  $0.00

Total stock gain at $20:  -$56.00

Total, absolute gain on the position:  $592.42

Total, absolute return percentage ($592.43/$8,038.00):  7.37%

Annualized total return percentage (held approx 105 days):  25.62%

KO

This is a 400-share position with a basis of $16,142.96, or $40.36 per share.  Since last July, I have been selling covered calls ranging from $38 to $40, and have mostly been out of the money while the stock flounders.  I decided to stay in and minimize stock losses, so this trade rolled out and up from a $38 to an Aug $39 strike – also ensuring I captured the March ex-dividend. If I get another chance for a roll-out, I’ll take it up to a $40 strike.

Total covered call premiums:  $937.36

Total dividend payments (forecast March and June ex-dividends):  $448.00

Total stock gain at $39:  -$560.96

Total, absolute gain on the position:  $824.40

Total, absolute return percentage ($824.40/$16,142.00):  5.11%

Annualized total return percentage (held approx 365 days):  5.11%

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%