PSUN - Adjustment

The following adjustment was made on PSUN today:

18-Dec-06 - Buy Back & Roll Out/Up - BTC 4 Jan07 17.50 Call @ -3.01
18-Dec-06 - Continued Trade - STO 4 Jan09 22.50 Call @ 3.69

Current Position Summary:

Stock Investment: $9,108.00
Income Generated: $1,489.00
Percent Income Generated: 16.35%
Net Profit If Called: $1,381.00
Percent Return If Called: 15.16%
Annualized Return If Called: 4.80%
Days to Expiration: 1152 days

Trade History:

21-Nov-05 - Initial Stock Position - BTO 200 PSUN @ 26.39
21-Nov-05 - Initial Call Option - STO 2 Dec05 25.00 Call @ 1.84
20-Dec-05 - Continued Trade - STO 2 Jan06 25.00 Call @ 0.69
23-Jan-06 - Continued Trade - STO 2 Mar06 25.00 Call @ 0.74
20-Mar-06 - Continued Trade - STO 2 Jun06 25.00 Call @ 0.64
26-Jun-06 - Dollar Cost Averaging - BTO 200 PSUN @ 19.16
26-Jun-06 - Combined Cost Basis - $9,108.00 400 @ 22.77
26-Jun-06 - Continued Trade - STO 4 Dec06 22.50 Call @ 0.69
18-Sep-06 - Buy Back & Roll Out/Down - BTC 4 Dec06 22.50 Call @ -0.16
18-Sep-06 - Interim Trade - STO 4 Jan07 17.50 Call @ 0.54
18-Dec-06 - Buy Back & Roll Out/Up - BTC 4 Jan07 17.50 Call @ -3.01
18-Dec-06 - Continued Trade - STO 4 Jan09 22.50 Call @ 3.69

BTO - Buy to Open BTC - Buy to Close STO - Sell to Open STC - Sell to Close

Notice that I rolled the calls out 2 years. This is one reason why you should only invest in stocks you're willing to hold for the long term, and preferably stocks that have LEAPS options available.

PSUN was initially purchased on 11/21/05 @ 26.39 and front month options were sold at the 25 strike for a couple of months. This was before I switched to longer term options with more downside protection and also before I changed my stock selection criteria. Also 200 shares were purchased initially. Now I limit my initial purchases to 100 shares.

The stock declined about 27% by June and I purchased another 200 shares @ 19.16, so my cost basis in the stock, excluding option premiums, is 22.77. I then sold 4 Dec06 22.50 calls.

Then by Sep the stock declined even further and was down 50% from the original purchase price. I bought back the 4 Dec06 22.50 calls and sold 4 Jan07 17.50 calls.

PSUN started to recover and the Jan07 17.50 calls were ITM with very little time value left so I rolled them out to Jan09 and up to the 22.50 strike today.

This position will now have a holding period of a little over 3 years if held until expiration. The return will only be 4.80% annualized, but that's not bad for a stock that was down by 50% at one point. A lot can happen between now and Jan09 so it's possible that this position will produce a higher return. Time will tell.