SWFT - Review

Here's a position on SWFT that closed in July. The following is the trade history and returns, including IB commissions. This position was established before I changed my return and stock selection criteria.

05/27/05 - Bought 200 shares @ 24.91
05/27/05 - Sold 2 Jun05 25 Calls @ 0.74
06/17/05 - Jun05 25 Calls expired
06/20/05 - Sold 2 Jul05 25 Calls @ 0.24
07/15/05 - Jul05 25 Calls expired
07/18/05 - Sold 2 Oct05 25 Calls @ 0.79
08/25/05 - Bought 2 Oct05 25 Calls @ -0.11
09/23/05 - Sold 2 Oct05 17.50 Calls @ 0.59
10/21/05 - Bought 2 Oct05 17.50 Calls @ -0.21
10/25/05 - Sold 2 Nov05 20 Calls @ 0.19
11/14/05 - Bought 2 Nov05 20 Calls @ -0.66
11/23/05 - Sold 2 Jan06 22.50 Calls @ 0.44
01/19/06 - Bought 2 Jan06 22.50 Call @ -0.61
01/19/06 - Sold 2 Apr06 25 Calls @ 1.04
03/24/06 - Bought 2 Apr06 25 Calls @ -0.16
03/24/06 - Sold Jul06 25 Calls @ 0.89
07/21/06 - Apr06 25 Calls exercised and stock called away

Stock Investment: $4,982.00
Income Generated: $637.00
Net Profit: $655.00
Percent Return: 13.15%
Annualized Return: 11.43%
Duration of Trade: 420 days

Buy & Hold Comparison

Opening Price: $24.91
Closing Price: $26.54
Dividends: $0.00
Net Profit: $163.00
Percent Return: 6.55%
Annualized Return: 5.69%
Duration of Trade: 420 days

This is a good example of a position that was recovered using rolling strategies. If you look at a chart of SWFT you'll see that the stock declined shortly after the initial purchase and then recovered. At one point, in Sep05, it traded as low as $16.25, or down about 35%.

In Sep05, after the stock dropped to its lowest point, the 25 calls were rolled down to 17.50. But then the stock started to recover and those calls had to be bought back and rolled up to 20. Then the 20 calls were bought back and rolled up to 22.50. And finally the 22.50 calls were bought back and rolled up to 25. The 25 calls were exercised in Jul06 and the stock was called away. Again, I allowed the stock to be called away because I no longer wanted to hold it.

This position did better than buy & hold, which only had a 5.69% annualized return. Even though the stock was down 35% at one point, again, rather than sell at a loss, the position was managed to a profit. Again, notice that the income generated was received long before the stock was called away and was able to be reinvested into other positions.