Friday, November 14, 2008

TLT - New Position

A new position was established today on TLT.

Since TIP was called away this week I was going to establish a new TIP position but there was no bid for the Nov or Dec 96 call. So I decided to establish a position on TLT instead, which has more option liquidity. So the fixed income portion of my covered call portfolio will now consist of both TIP & TLT.

I decided on an ITM call for Nov since there's only 7 days left until expiration. Ex-dividend date isn't until the first week of Dec, so after Nov expiration, if TLT is called away, I still have time to establish a Dec covered call and still receive the dividend.

The following is the trade information, including IB commissions:

14-Nov-08 - Initial Stock Position - BTO 100 TLT @ 95.24
14-Nov-08 - Initial Call Option - STO 1 Nov08 95.00 Call @ 1.04

Stock Investment: $9,524.00
Income Generated: $104.00
Percent Income Generated: 1.09%
Annualized Income Generated: 56.94%
Net Profit If Called: $80.00
Percent Return If Called: 0.84%
Annualized Return If Called: 43.80%
Days Held to Expiration: 7 days