As I mentioned in the previous posts, I made adjustments to several of the positions where November Covered Calls have been written. I will summarize each of the transactions in separate posts. Today, the underlying is COP.
As a note, COP was my first covered call transaction in the new Scottrade account. I bought the shares at $63.09 and sold an Oct 65 which was assigned on the dividend ex-date. That transaction whetted my appetite for this strategy.
Because I want to have a diversity of opportunity across industry sectors in this account, I returned to COP for a new transaction this month. Analysis below is net of commissions.
COP
11/4/2011 Bought 100 shares at $69.81 (total $6,988)
11/4/2011 Sold 1 COP Nov 2011 70 at $1.48 (total $139.74)
11/8/2011 Bought to close 1 COP Nov 70 at $2.26 (total $234.25)
11/8/2011 Sold to open 1 COP Nov 72.50 at $.74 (total $65.74)
Net Profit:
1) Options Income: + $139.74 - $234.25 + $65.74 = -$28.77
2) Dividend Income: None, ex-date was in October
3) Capital Appreciation if assigned at 72.50: $7,232-$6,988 = $244
Total Net Profit: $244 - $28.77 = $215.23
Absolute Return on Investment: ($215.23/$6,988) = 3.08%
Annualized Return if Assigned (14 days): 3.08%*(365/14) = 80.3%
Today's closing price was $71.70
Lesson Learned: I was not happy to complete the roll-up for a debit, which reduced my options income on this trade (at this point, anyway) to a negative amount. I will institute a new rule about adjustments going forward - roll-ups and roll-outs will not be written for net losses; I will seek to complete adjustment transactions for a net credit.
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