I made several adjustments today and opened 3 new dividend positions. Most of the adjustments were Interim Trades, meaning I sold calls at a strike price below my net cost basis, which would result in a loss if these calls are exercised. So, I'll have to monitor them closely and possibly roll them out if they go ITM in order to avoid assignment. These positions are down quite a lot but they continue to bring in cash flow. Some pay dividends, which help, but some don't. I'm going to try to manage my way out of the non-dividend paying stocks, but this is going to take some time.
The 3 new positions I established today were all dividend plays, with ex-dividend dates approaching. I've started tracking the highest yielding dividend paying stocks looking for opportunities around their ex-dividend date. I then research the company's fundamentals, dividend history, and valuation. Once I find a company I like, I look to see if I can find a covered call position that meets my return requirements. This is the start of my revised strategy, which is still in development. But I thought I'd try out a few positions first to see if it's viable. The BBT position I established earlier this month will most likely get called away, since the stock has taken off recently. I'm missing out on the capital gains though, unless I decide to average up and roll out the calls. But it's so deep ITM now, I may just let it get called. This is the downside to covered calls known as opportunity risk. In this case a buy & hold strategy would have been better. But who knows when a stock is going to take off like this? Certainly, not me.
This has been a wild week in the market. I'm glad I sat on the sidelines for the past 2 days. Sometimes doing nothing is the best thing you can do. When the market goes crazy like this, you need to stay calm and look at the "businesses" you own, not the "stocks". Then ask yourself, did the company fundamentals change between Friday and Tuesday? If the answer is "No", then don't worry about what Mr. Market thinks your stocks are worth. Mr. Market isn't always right, and can be quite irrational in either direction. Eventually, price follows value. As Ben Graham said "in the short-term the market is a voting machine, in the long-term it's a weighing machine". Joe Ponzio, at F Wall Street wrote a great article the other day on The Markets. It's worth reading and remembering in times like this.
Thursday, January 24, 2008
WFC - New Position
A new dividend position was established today on WFC. The following is the trade information, including IB commissions:
24-Jan-08 - Initial Stock Position - BTO 100 WFC @ 30.13
24-Jan-08 - Initial Call Option - STO 1 Feb08 30.00 Call @ 1.34
01-Mar-08 - Dividend Received - DIV 100 Dividend @ 0.31
Summary without the dividend if called early on Ex-Dividend date:
Stock Investment: $3,013.00
Income Generated: $134.00
Percent Income Generated: 4.45%
Annualized Income Generated: 124.87%
Net Profit If Called: $121.00
Percent Return If Called: 4.02%
Annualized Return If Called: 112.75%
Days to Expiration: 13 days
Summary with the dividend if called at option expiration:
Stock Investment: $3,013.00
Income Generated: $165.00
Percent Income Generated: 5.48%
Annualized Income Generated: 90.86%
Net Profit If Called: $152.00
Percent Return If Called: 5.04%
Annualized Return If Called: 83.70%
Days to Expiration: 22 days
Dividend Information:
Ex-Dividend Date: 02/06/08
Dividend Pay Date: 03/01/08
Dividend Rate: $1.24
Dividend Yield: 4.20%
24-Jan-08 - Initial Stock Position - BTO 100 WFC @ 30.13
24-Jan-08 - Initial Call Option - STO 1 Feb08 30.00 Call @ 1.34
01-Mar-08 - Dividend Received - DIV 100 Dividend @ 0.31
Summary without the dividend if called early on Ex-Dividend date:
Stock Investment: $3,013.00
Income Generated: $134.00
Percent Income Generated: 4.45%
Annualized Income Generated: 124.87%
Net Profit If Called: $121.00
Percent Return If Called: 4.02%
Annualized Return If Called: 112.75%
Days to Expiration: 13 days
Summary with the dividend if called at option expiration:
Stock Investment: $3,013.00
Income Generated: $165.00
Percent Income Generated: 5.48%
Annualized Income Generated: 90.86%
Net Profit If Called: $152.00
Percent Return If Called: 5.04%
Annualized Return If Called: 83.70%
Days to Expiration: 22 days
Dividend Information:
Ex-Dividend Date: 02/06/08
Dividend Pay Date: 03/01/08
Dividend Rate: $1.24
Dividend Yield: 4.20%
PFE - New Position
A new dividend position was established today on PFE. The following is the trade information, including IB commissions:
24-Jan-08 - Initial Stock Position - BTO 200 PFE @ 22.83
24-Jan-08 - Initial Call Option - STO 2 Mar08 22.50 Call @ 0.97
04-Mar-08 - Dividend Received - DIV 200 Dividend @ 0.32
Summary without the dividend if called early on Ex-Dividend date:
Stock Investment: $4,565.00
Income Generated: $193.00
Percent Income Generated: 4.23%
Annualized Income Generated: 118.70%
Net Profit If Called: $128.00
Percent Return If Called: 2.80%
Annualized Return If Called: 78.73%
Days to Expiration: 13 days
Summary with the dividend if called at option expiration:
Stock Investment: $4,565.00
Income Generated: $257.00
Percent Income Generated: 5.63%
Annualized Income Generated: 36.05%
Net Profit If Called: $192.00
Percent Return If Called: 4.21%
Annualized Return If Called: 26.93%
Days to Expiration: 57 days
Dividend Information:
Ex-Dividend Date: 02/06/08
Dividend Pay Date: 03/04/08
Dividend Rate: $1.28
Dividend Yield: 5.60%
24-Jan-08 - Initial Stock Position - BTO 200 PFE @ 22.83
24-Jan-08 - Initial Call Option - STO 2 Mar08 22.50 Call @ 0.97
04-Mar-08 - Dividend Received - DIV 200 Dividend @ 0.32
Summary without the dividend if called early on Ex-Dividend date:
Stock Investment: $4,565.00
Income Generated: $193.00
Percent Income Generated: 4.23%
Annualized Income Generated: 118.70%
Net Profit If Called: $128.00
Percent Return If Called: 2.80%
Annualized Return If Called: 78.73%
Days to Expiration: 13 days
Summary with the dividend if called at option expiration:
Stock Investment: $4,565.00
Income Generated: $257.00
Percent Income Generated: 5.63%
Annualized Income Generated: 36.05%
Net Profit If Called: $192.00
Percent Return If Called: 4.21%
Annualized Return If Called: 26.93%
Days to Expiration: 57 days
Dividend Information:
Ex-Dividend Date: 02/06/08
Dividend Pay Date: 03/04/08
Dividend Rate: $1.28
Dividend Yield: 5.60%
PAYX - New Position
A new dividend position was established today on PAYX. The following is the trade information, including IB commissions:
24-Jan-08 - Initial Stock Position - BTO 100 PAYX @ 33.29
24-Jan-08 - Initial Call Option - STO 1 Mar08 32.50 Call @ 1.84
15-Feb-08 - Dividend Received - DIV 100 Dividend @ 0.30
Summary without the dividend if called early on Ex-Dividend date:
Stock Investment: $3,329.00
Income Generated: $184.00
Percent Income Generated: 5.53%
Annualized Income Generated: 336.24%
Net Profit If Called: $105.00
Percent Return If Called: 3.15%
Annualized Return If Called: 112.75%
Days to Expiration: 6 days
Summary with the dividend if called at option expiration:
Stock Investment: $3,329.00
Income Generated: $214.00
Percent Income Generated: 6.43%
Annualized Income Generated: 41.16%
Net Profit If Called: $135.00
Percent Return If Called: 4.06%
Annualized Return If Called: 25.97%
Days to Expiration: 57 days
Dividend Information:
Ex-Dividend Date: 01/30/08
Dividend Pay Date: 02/15/08
Dividend Rate: $1.20
Dividend Yield: 3.60%
24-Jan-08 - Initial Stock Position - BTO 100 PAYX @ 33.29
24-Jan-08 - Initial Call Option - STO 1 Mar08 32.50 Call @ 1.84
15-Feb-08 - Dividend Received - DIV 100 Dividend @ 0.30
Summary without the dividend if called early on Ex-Dividend date:
Stock Investment: $3,329.00
Income Generated: $184.00
Percent Income Generated: 5.53%
Annualized Income Generated: 336.24%
Net Profit If Called: $105.00
Percent Return If Called: 3.15%
Annualized Return If Called: 112.75%
Days to Expiration: 6 days
Summary with the dividend if called at option expiration:
Stock Investment: $3,329.00
Income Generated: $214.00
Percent Income Generated: 6.43%
Annualized Income Generated: 41.16%
Net Profit If Called: $135.00
Percent Return If Called: 4.06%
Annualized Return If Called: 25.97%
Days to Expiration: 57 days
Dividend Information:
Ex-Dividend Date: 01/30/08
Dividend Pay Date: 02/15/08
Dividend Rate: $1.20
Dividend Yield: 3.60%
WGO - Adjustment
The following adjustment was made today on WGO:
24-Jan-08 - Interim Trade - STO 2 Feb08 22.50 Call @ 0.44 -
Current Position Summary:
Stock Investment: $6,455.00
Income Generated: $1,254.10
Percent Income Generated: 19.43%
Annualized Income Generated: 7.54%
Net Profit If Called: -$700.90
Percent Return If Called: -10.86%
Annualized Return If Called: -4.21%
Days Held to Expiration: 941 days
Trade History:
19-Jul-05 - Initial Stock Position - BTO 100 WGO @ 34.92 -
19-Jul-05 - Initial Call Option - STO 1 Aug05 35.00 Call @ 1.09 - Expired
22-Aug-05 - Continued Trade - STO 1 Sep05 35.00 Call @ 0.44 - Closed
01-Sep-05 - Buy Back & Roll Out - BTC 1 Sep05 35.00 Call @ -0.06 -
19-Sep-05 - Continued Trade - STO 1 Nov05 35.00 Call @ 0.34 - Closed
03-Oct-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
21-Oct-05 - Buy Back & Roll Down - BTC 1 Nov05 35.00 Call @ -0.06 -
24-Oct-05 - Interim Trade - STO 1 Nov05 30.00 Call @ 0.24 - Closed
14-Nov-05 - Buy Back & Roll Up - BTC 1 Nov05 30.00 Call @ -2.66 -
21-Nov-05 - Continued Trade - STO 1 Jan06 35.00 Call @ 0.99 - Expired
09-Jan-06 - Dividend Received - DIV 100 Dividend @ 0.09 -
23-Jan-06 - Continued Trade - STO 1 Mar06 35.00 Call @ 0.44 - Expired
20-Mar-06 - Dollar Cost Averaging - BTO 100 WGO @ 29.63 -
20-Mar-06 - Combined Cost Basis - $6,455.00 200 @ 32.28 -
20-Mar-06 - Continued Trade - STO 2 Jul05 35.00 Call @ 0.69 - Expired
03-Apr-06 - Dividend Received - DIV 100 Dividend @ 0.09 -
10-Jul-06 - Dividend Received - DIV 200 Dividend @ 0.09 -
24-Jul-06 - Continued Trade - STO 2 Jan07 35.00 Call @ 1.39 - Closed
09-Oct-06 - Dividend Received - DIV 200 Dividend @ 0.10 -
22-Dec-06 - Buy Back & Roll Out - BTC 2 Jan07 35.00 Call @ -0.16 -
22-Dec-06 - Continued Trade - STO 2 Apr07 35.00 Call @ 1.19 - Expired
08-Jan-07 - Dividend Received - DIV 200 Dividend @ 0.10 -
09-Apr-07 - Dividend Received - DIV 200 Dividend @ 0.10 -
23-Apr-07 - Continued Trade - STO 2 May07 35.00 Call @ 0.54 - Expired
21-May-07 - Continued Trade - STO 2 Jun07 35.00 Call @ 0.09 - Expired
19-Jun-07 - Continued Trade - STO 2 Jan08 35.00 Call @ 0.94 - Expired
09-Jul-07 - Dividend Received - DIV 200 Dividend @ 0.10 -
08-Oct-07 - Dividend Received - DIV 200 Dividend @ 0.12 -
24-Jan-08 - Interim Trade - STO 2 Feb08 22.50 Call @ 0.44 -
24-Jan-08 - Interim Trade - STO 2 Feb08 22.50 Call @ 0.44 -
Current Position Summary:
Stock Investment: $6,455.00
Income Generated: $1,254.10
Percent Income Generated: 19.43%
Annualized Income Generated: 7.54%
Net Profit If Called: -$700.90
Percent Return If Called: -10.86%
Annualized Return If Called: -4.21%
Days Held to Expiration: 941 days
Trade History:
19-Jul-05 - Initial Stock Position - BTO 100 WGO @ 34.92 -
19-Jul-05 - Initial Call Option - STO 1 Aug05 35.00 Call @ 1.09 - Expired
22-Aug-05 - Continued Trade - STO 1 Sep05 35.00 Call @ 0.44 - Closed
01-Sep-05 - Buy Back & Roll Out - BTC 1 Sep05 35.00 Call @ -0.06 -
19-Sep-05 - Continued Trade - STO 1 Nov05 35.00 Call @ 0.34 - Closed
03-Oct-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
21-Oct-05 - Buy Back & Roll Down - BTC 1 Nov05 35.00 Call @ -0.06 -
24-Oct-05 - Interim Trade - STO 1 Nov05 30.00 Call @ 0.24 - Closed
14-Nov-05 - Buy Back & Roll Up - BTC 1 Nov05 30.00 Call @ -2.66 -
21-Nov-05 - Continued Trade - STO 1 Jan06 35.00 Call @ 0.99 - Expired
09-Jan-06 - Dividend Received - DIV 100 Dividend @ 0.09 -
23-Jan-06 - Continued Trade - STO 1 Mar06 35.00 Call @ 0.44 - Expired
20-Mar-06 - Dollar Cost Averaging - BTO 100 WGO @ 29.63 -
20-Mar-06 - Combined Cost Basis - $6,455.00 200 @ 32.28 -
20-Mar-06 - Continued Trade - STO 2 Jul05 35.00 Call @ 0.69 - Expired
03-Apr-06 - Dividend Received - DIV 100 Dividend @ 0.09 -
10-Jul-06 - Dividend Received - DIV 200 Dividend @ 0.09 -
24-Jul-06 - Continued Trade - STO 2 Jan07 35.00 Call @ 1.39 - Closed
09-Oct-06 - Dividend Received - DIV 200 Dividend @ 0.10 -
22-Dec-06 - Buy Back & Roll Out - BTC 2 Jan07 35.00 Call @ -0.16 -
22-Dec-06 - Continued Trade - STO 2 Apr07 35.00 Call @ 1.19 - Expired
08-Jan-07 - Dividend Received - DIV 200 Dividend @ 0.10 -
09-Apr-07 - Dividend Received - DIV 200 Dividend @ 0.10 -
23-Apr-07 - Continued Trade - STO 2 May07 35.00 Call @ 0.54 - Expired
21-May-07 - Continued Trade - STO 2 Jun07 35.00 Call @ 0.09 - Expired
19-Jun-07 - Continued Trade - STO 2 Jan08 35.00 Call @ 0.94 - Expired
09-Jul-07 - Dividend Received - DIV 200 Dividend @ 0.10 -
08-Oct-07 - Dividend Received - DIV 200 Dividend @ 0.12 -
24-Jan-08 - Interim Trade - STO 2 Feb08 22.50 Call @ 0.44 -
SHFL - Adjustment
The following adjustment was made today on SHFL:
24-Jan-08 - Interim Trade - STO 2 Mar08 10.00 Call @ 0.39 -
Current Position Summary:
Stock Investment: $4,263.00
Income Generated: $605.10
Percent Income Generated: 14.19%
Annualized Income Generated: 13.15%
Net Profit If Called: -$1,657.90
Percent Return If Called: -38.89%
Annualized Return If Called: -36.03%
Days Held to Expiration: 394 days
Trade History:
21-Feb-07 - Initial Stock Position - BTO 100 SHFL @ 25.52 -
21-Feb-07 - Initial Call Option - STO 1 Aug07 25.00 Call @ 2.99 - Closed
21-Jun-07 - Buy Back - BTC 1 Aug07 25.00 Call @ -0.11 -
21-Jun-07 - Dollar Cost Averaging - BTO 100 SHFL @ 17.11 -
21-Jun-07 - Combined Cost Basis - $4,263.00 200 @ 21.32 -
21-Jun-07 - Interim Trade - STO 2 Jan08 20.00 Call @ 1.19 - Expired
24-Jan-08 - Interim Trade - STO 2 Mar08 10.00 Call @ 0.39 -
24-Jan-08 - Interim Trade - STO 2 Mar08 10.00 Call @ 0.39 -
Current Position Summary:
Stock Investment: $4,263.00
Income Generated: $605.10
Percent Income Generated: 14.19%
Annualized Income Generated: 13.15%
Net Profit If Called: -$1,657.90
Percent Return If Called: -38.89%
Annualized Return If Called: -36.03%
Days Held to Expiration: 394 days
Trade History:
21-Feb-07 - Initial Stock Position - BTO 100 SHFL @ 25.52 -
21-Feb-07 - Initial Call Option - STO 1 Aug07 25.00 Call @ 2.99 - Closed
21-Jun-07 - Buy Back - BTC 1 Aug07 25.00 Call @ -0.11 -
21-Jun-07 - Dollar Cost Averaging - BTO 100 SHFL @ 17.11 -
21-Jun-07 - Combined Cost Basis - $4,263.00 200 @ 21.32 -
21-Jun-07 - Interim Trade - STO 2 Jan08 20.00 Call @ 1.19 - Expired
24-Jan-08 - Interim Trade - STO 2 Mar08 10.00 Call @ 0.39 -
PSUN - Adjustment
The following adjustment was made today on PSUN:
24-Jan-08 - Interim Trade - STO 4 Jun08 12.50 Call @ 0.74 -
Current Position Summary:
Stock Investment: $9,108.00
Income Generated: $1,543.40
Percent Income Generated: 16.95%
Annualized Income Generated: 6.57%
Net Profit If Called: -$2,564.60
Percent Return If Called: -28.16%
Annualized Return If Called: -10.91%
Days Held to Expiration: 942 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 - Expired
20-Dec-05 - Continued Trade - STO 2 Jan06 25.00 Call @ 0.69 - Expired
23-Jan-06 - Continued Trade - STO 2 Mar06 25.00 Call @ 0.74 - Expired
20-Mar-06 - Continued Trade - STO 2 Jun06 25.00 Call @ 0.64 - Expired
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 - Closed
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 - Closed
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 - Closed
07-Jan-08 - Buy Back - BTC 4 Jan09 22.50 Call @ -0.61 -
24-Jan-08 - Interim Trade - STO 4 Jun08 12.50 Call @ 0.74 -
24-Jan-08 - Interim Trade - STO 4 Jun08 12.50 Call @ 0.74 -
Current Position Summary:
Stock Investment: $9,108.00
Income Generated: $1,543.40
Percent Income Generated: 16.95%
Annualized Income Generated: 6.57%
Net Profit If Called: -$2,564.60
Percent Return If Called: -28.16%
Annualized Return If Called: -10.91%
Days Held to Expiration: 942 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 - Expired
20-Dec-05 - Continued Trade - STO 2 Jan06 25.00 Call @ 0.69 - Expired
23-Jan-06 - Continued Trade - STO 2 Mar06 25.00 Call @ 0.74 - Expired
20-Mar-06 - Continued Trade - STO 2 Jun06 25.00 Call @ 0.64 - Expired
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 - Closed
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 - Closed
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 - Closed
07-Jan-08 - Buy Back - BTC 4 Jan09 22.50 Call @ -0.61 -
24-Jan-08 - Interim Trade - STO 4 Jun08 12.50 Call @ 0.74 -
PFCB - Adjustment
TThe following adjustment was made today on PFCB:
24-Jan-08 - Interim Trade - STO 1 Feb08 30.00 Call @ 0.65 -
Current Position Summary:
Stock Investment: $3,578.00
Income Generated: $356.00
Percent Income Generated: 9.95%
Annualized Income Generated: 20.29%
Net Profit If Called: -$222.00
Percent Return If Called: -6.20%
Annualized Return If Called: -12.65%
Days to Expiration: 179 days
Trade History:
20-Aug-07 - Initial Stock Position - BTO 100 PFCB @ 35.78 -
20-Aug-07 - Initial Call Option - STO 1 Sep07 35.00 Call @ 2.30 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 35.00 Call @ 0.39 - Expired
25-Oct-07 - Continued Trade - STO 1 Jan08 35.00 Call @ 0.22 - Expired
24-Jan-08 - Interim Trade - STO 1 Feb08 30.00 Call @ 0.65 -
24-Jan-08 - Interim Trade - STO 1 Feb08 30.00 Call @ 0.65 -
Current Position Summary:
Stock Investment: $3,578.00
Income Generated: $356.00
Percent Income Generated: 9.95%
Annualized Income Generated: 20.29%
Net Profit If Called: -$222.00
Percent Return If Called: -6.20%
Annualized Return If Called: -12.65%
Days to Expiration: 179 days
Trade History:
20-Aug-07 - Initial Stock Position - BTO 100 PFCB @ 35.78 -
20-Aug-07 - Initial Call Option - STO 1 Sep07 35.00 Call @ 2.30 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 35.00 Call @ 0.39 - Expired
25-Oct-07 - Continued Trade - STO 1 Jan08 35.00 Call @ 0.22 - Expired
24-Jan-08 - Interim Trade - STO 1 Feb08 30.00 Call @ 0.65 -
NTES - Adjustment
The following adjustment was made today on NTES:
24-Jan-08 - Continued Trade - STO 4 Mar08 20.00 Call @ 0.74 -
Current Position Summary:
Stock Investment: $9,694.00
Income Generated: $4,240.00
Percent Income Generated: 43.74%
Annualized Income Generated: 21.81%
Net Profit If Called: $2,546.00
Percent Return If Called: 26.26%
Annualized Return If Called: 13.10%
Days to Expiration: 732 days
Trade History:
20-Mar-06 - Initial Stock Position - BTO 100 NTES @ 96.94 - 4-1 Split
20-Mar-06 - Initial Call Option - STO 1 Jun06 85.00 Call @ 15.29 - 4-1 Split
28-Mar-06 - Split Stock Position - SPLT 400 NTES @ 24.24 -
28-Mar-06 - Split Call Option - SPLT 4 Jun06 21.25 Call @ 3.82 - Expired
26-Jun-06 - Continued Trade - STO 4 Jan07 22.50 Call @ 3.19 - Closed
23-Oct-06 - Buy Back & Roll Out/Down - BTC 4 Jan07 22.50 Call @ -0.16 -
23-Oct-06 - Continued Trade - STO 4 Jan07 18.75 Call @ 0.69 - Closed
17-Jan-07 - Buy Back & Roll Out/Up - BTC 4 Jan07 18.75 Call @ -0.41 -
17-Jan-07 - Continued Trade - STO 4 Mar07 20.00 Call @ 0.99 - Expired
19-Mar-07 - Interim Trade - STO 4 Apr07 20.00 Call @ 0.19 - Expired
23-Apr-07 - Interim Trade - STO 4 May07 20.00 Call @ 0.19 - Expired
21-May-07 - Interim Trade - STO 4 Jun07 20.00 Call @ 0.34 - Expired
19-Jun-07 - Interim Trade - STO 4 Sep07 20.00 Call @ 0.32 - Expired
24-Sep-07 - Continued Trade - STO 4 Dec07 20.00 Call @ 0.67 - Expired
24-Jan-08 - Continued Trade - STO 4 Mar08 20.00 Call @ 0.74 -
24-Jan-08 - Continued Trade - STO 4 Mar08 20.00 Call @ 0.74 -
Current Position Summary:
Stock Investment: $9,694.00
Income Generated: $4,240.00
Percent Income Generated: 43.74%
Annualized Income Generated: 21.81%
Net Profit If Called: $2,546.00
Percent Return If Called: 26.26%
Annualized Return If Called: 13.10%
Days to Expiration: 732 days
Trade History:
20-Mar-06 - Initial Stock Position - BTO 100 NTES @ 96.94 - 4-1 Split
20-Mar-06 - Initial Call Option - STO 1 Jun06 85.00 Call @ 15.29 - 4-1 Split
28-Mar-06 - Split Stock Position - SPLT 400 NTES @ 24.24 -
28-Mar-06 - Split Call Option - SPLT 4 Jun06 21.25 Call @ 3.82 - Expired
26-Jun-06 - Continued Trade - STO 4 Jan07 22.50 Call @ 3.19 - Closed
23-Oct-06 - Buy Back & Roll Out/Down - BTC 4 Jan07 22.50 Call @ -0.16 -
23-Oct-06 - Continued Trade - STO 4 Jan07 18.75 Call @ 0.69 - Closed
17-Jan-07 - Buy Back & Roll Out/Up - BTC 4 Jan07 18.75 Call @ -0.41 -
17-Jan-07 - Continued Trade - STO 4 Mar07 20.00 Call @ 0.99 - Expired
19-Mar-07 - Interim Trade - STO 4 Apr07 20.00 Call @ 0.19 - Expired
23-Apr-07 - Interim Trade - STO 4 May07 20.00 Call @ 0.19 - Expired
21-May-07 - Interim Trade - STO 4 Jun07 20.00 Call @ 0.34 - Expired
19-Jun-07 - Interim Trade - STO 4 Sep07 20.00 Call @ 0.32 - Expired
24-Sep-07 - Continued Trade - STO 4 Dec07 20.00 Call @ 0.67 - Expired
24-Jan-08 - Continued Trade - STO 4 Mar08 20.00 Call @ 0.74 -
MCO - Adjustment
The following adjustment was made today on MCO:
24-Jan-08 - Interim Trade - STO 2 Feb08 40.00 Call @ 0.89 -
Current Position Summary:
Stock Investment: $10,649.00
Income Generated: $877.20
Percent Income Generated: 8.24%
Annualized Income Generated: 12.96%
Net Profit If Called: -$1,771.80
Percent Return If Called: -16.64%
Annualized Return If Called: -26.18%
Days to Expiration: 232 days
Trade History:
28-Jun-07 - Initial Stock Position - BTO 100 MCO @ 62.41 -
28-Jun-07 - Initial Call Option - STO 1 Jul07 60.00 Call @ 3.49 - Expired
25-Jul-07 - Continued Trade - STO 1 Aug07 60.00 Call @ 1.54 - Expired
20-Aug-07 - Interim Trade - STO 1 Sep07 55.00 Call @ 0.89 - Expired
10-Sep-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
24-Sep-07 - Interim Trade - STO 1 Oct07 55.00 Call @ 0.24 - Expired
25-Oct-07 - Dollar Cost Averaging - BTO 100 MCO @ 44.08 -
25-Oct-07 - Combined Cost Basis - $10,649.00 200 @ 53.25 -
25-Oct-07 - Continued Trade - STO 2 Dec07 55.00 Call @ 0.29 - Expired
10-Dec-07 - Dividend Received - DIV 200 Dividend @ 0.08 -
24-Jan-08 - Interim Trade - STO 2 Feb08 40.00 Call @ 0.89 -
24-Jan-08 - Interim Trade - STO 2 Feb08 40.00 Call @ 0.89 -
Current Position Summary:
Stock Investment: $10,649.00
Income Generated: $877.20
Percent Income Generated: 8.24%
Annualized Income Generated: 12.96%
Net Profit If Called: -$1,771.80
Percent Return If Called: -16.64%
Annualized Return If Called: -26.18%
Days to Expiration: 232 days
Trade History:
28-Jun-07 - Initial Stock Position - BTO 100 MCO @ 62.41 -
28-Jun-07 - Initial Call Option - STO 1 Jul07 60.00 Call @ 3.49 - Expired
25-Jul-07 - Continued Trade - STO 1 Aug07 60.00 Call @ 1.54 - Expired
20-Aug-07 - Interim Trade - STO 1 Sep07 55.00 Call @ 0.89 - Expired
10-Sep-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
24-Sep-07 - Interim Trade - STO 1 Oct07 55.00 Call @ 0.24 - Expired
25-Oct-07 - Dollar Cost Averaging - BTO 100 MCO @ 44.08 -
25-Oct-07 - Combined Cost Basis - $10,649.00 200 @ 53.25 -
25-Oct-07 - Continued Trade - STO 2 Dec07 55.00 Call @ 0.29 - Expired
10-Dec-07 - Dividend Received - DIV 200 Dividend @ 0.08 -
24-Jan-08 - Interim Trade - STO 2 Feb08 40.00 Call @ 0.89 -
GGC - Adjustment
The following adjustment was made today on GGC:
24-Jan-08 - Interim Trade - STO 3 Mar08 7.50 Call @ 0.29 -
Current Position Summary:
Stock Investment: $4,269.00
Income Generated: $628.80
Percent Income Generated: 14.73%
Annualized Income Generated: 13.65%
Net Profit If Called: -$1,390.20
Percent Return If Called: -32.57%
Annualized Return If Called: -30.17%
Days to Expiration: 394 days
Trade History:
21-Feb-07 - Initial Stock Position - BTO 100 GGC @ 20.54 -
21-Feb-07 - Initial Call Option - STO 1 May07 20.00 Call @ 2.13 - Expired
10-Apr-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
21-May-07 - Continued Trade - STO 1 Jun07 20.00 Call @ 0.29 - Expired
19-Jun-07 - Continued Trade - STO 1 Nov07 20.00 Call @ 1.39 - Closed
10-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
10-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
02-Nov-07 - Buy Back & Roll Down - BTC 1 Nov07 20.00 Call @ -0.06 -
02-Nov-07 - Dollar Cost Averaging - BTO 200 GGC @ 11.08 -
02-Nov-07 - Combined Cost Basis - $4,269.00 300 @ 14.23 -
02-Nov-07 - Interim Trade - STO 3 Dec07 12.50 Call @ 0.39 - Expired
10-Jan-08 - Dividend Received - DIV 300 Dividend @ 0.08 -
24-Jan-08 - Interim Trade - STO 3 Mar08 7.50 Call @ 0.29 -
24-Jan-08 - Interim Trade - STO 3 Mar08 7.50 Call @ 0.29 -
Current Position Summary:
Stock Investment: $4,269.00
Income Generated: $628.80
Percent Income Generated: 14.73%
Annualized Income Generated: 13.65%
Net Profit If Called: -$1,390.20
Percent Return If Called: -32.57%
Annualized Return If Called: -30.17%
Days to Expiration: 394 days
Trade History:
21-Feb-07 - Initial Stock Position - BTO 100 GGC @ 20.54 -
21-Feb-07 - Initial Call Option - STO 1 May07 20.00 Call @ 2.13 - Expired
10-Apr-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
21-May-07 - Continued Trade - STO 1 Jun07 20.00 Call @ 0.29 - Expired
19-Jun-07 - Continued Trade - STO 1 Nov07 20.00 Call @ 1.39 - Closed
10-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
10-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.08 -
02-Nov-07 - Buy Back & Roll Down - BTC 1 Nov07 20.00 Call @ -0.06 -
02-Nov-07 - Dollar Cost Averaging - BTO 200 GGC @ 11.08 -
02-Nov-07 - Combined Cost Basis - $4,269.00 300 @ 14.23 -
02-Nov-07 - Interim Trade - STO 3 Dec07 12.50 Call @ 0.39 - Expired
10-Jan-08 - Dividend Received - DIV 300 Dividend @ 0.08 -
24-Jan-08 - Interim Trade - STO 3 Mar08 7.50 Call @ 0.29 -
EXP - Adjustment
The following adjustment was made today on EXP:
24-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 1.29 -
Current Position Summary:
Stock Investment: $10,854.00
Income Generated: $1,717.95
Percent Income Generated: 15.82%
Annualized Income Generated: 8.73%
Net Profit If Called: -$2,138.05
Percent Return If Called: -19.69%
Annualized Return If Called: -10.86%
Days to Expiration: 662 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 EXP @ 70.60 -
24-Apr-06 - Initial Call Option - STO 1 May06 65.00 Call @ 8.29 - Expired
22-May-06 - Continued Trade - STO 1 Oct06 60.00 Call @ 2.39 -
20-Jul-06 - Dividend Received - DIV 100 Dividend @ 0.18 -
25-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Oct06 60.00 Call @ -0.21 - Closed
25-Jul-06 - Interim Trade - STO 1 Jan07 50.00 Call @ 2.19 - Closed
23-Oct-06 - Buy Back & Roll Down - BTC 1 Jan07 50.00 Call @ -0.26 -
23-Oct-06 - Interim Trade - STO 1 Jan07 40.00 Call @ 1.34 - Closed
02-Nov-06 - Dividend Received - DIV 100 Dividend @ 0.18 -
19-Dec-06 - Buy Back & Roll Out/Up - BTC 1 Jan07 40.00 Call @ -3.41 -
19-Dec-06 - Interim Trade - STO 1 Jul07 45.00 Call @ 4.39 - Closed
05-Jul-07 - Buy Back & Roll Out/Up - BTC 1 Jul07 45.00 Call @ -5.41 -
05-Jul-07 - Interim Trade - STO 1 Jan08 55.00 Call @ 3.29 - Closed
20-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.20 -
24-Oct-07 - Buy Back & Roll Down - BTC 1 Jan08 55.00 Call @ -0.16 -
24-Oct-07 - Dollar Cost Averaging - BTO 100 EXP @ 37.94 -
24-Oct-07 - Combined Cost Basis - $10,856.00 200 @ 54.28 -
24-Oct-07 - Interim Trade - STO 2 Jan08 45.00 Call @ 0.69 - Expired
05-Nov-07 - Dividend Received - DIV 100 Dividend @ 0.20 -
24-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 1.29 -
24-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 1.29 -
Current Position Summary:
Stock Investment: $10,854.00
Income Generated: $1,717.95
Percent Income Generated: 15.82%
Annualized Income Generated: 8.73%
Net Profit If Called: -$2,138.05
Percent Return If Called: -19.69%
Annualized Return If Called: -10.86%
Days to Expiration: 662 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 EXP @ 70.60 -
24-Apr-06 - Initial Call Option - STO 1 May06 65.00 Call @ 8.29 - Expired
22-May-06 - Continued Trade - STO 1 Oct06 60.00 Call @ 2.39 -
20-Jul-06 - Dividend Received - DIV 100 Dividend @ 0.18 -
25-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Oct06 60.00 Call @ -0.21 - Closed
25-Jul-06 - Interim Trade - STO 1 Jan07 50.00 Call @ 2.19 - Closed
23-Oct-06 - Buy Back & Roll Down - BTC 1 Jan07 50.00 Call @ -0.26 -
23-Oct-06 - Interim Trade - STO 1 Jan07 40.00 Call @ 1.34 - Closed
02-Nov-06 - Dividend Received - DIV 100 Dividend @ 0.18 -
19-Dec-06 - Buy Back & Roll Out/Up - BTC 1 Jan07 40.00 Call @ -3.41 -
19-Dec-06 - Interim Trade - STO 1 Jul07 45.00 Call @ 4.39 - Closed
05-Jul-07 - Buy Back & Roll Out/Up - BTC 1 Jul07 45.00 Call @ -5.41 -
05-Jul-07 - Interim Trade - STO 1 Jan08 55.00 Call @ 3.29 - Closed
20-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.20 -
24-Oct-07 - Buy Back & Roll Down - BTC 1 Jan08 55.00 Call @ -0.16 -
24-Oct-07 - Dollar Cost Averaging - BTO 100 EXP @ 37.94 -
24-Oct-07 - Combined Cost Basis - $10,856.00 200 @ 54.28 -
24-Oct-07 - Interim Trade - STO 2 Jan08 45.00 Call @ 0.69 - Expired
05-Nov-07 - Dividend Received - DIV 100 Dividend @ 0.20 -
24-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 1.29 -
DHI - Adjustment
The following adjustment was made today on DHI:
24-Jan-08 - Interim Trade - STO 3 Feb08 15.00 Call @ 0.69 -
Current Position Summary:
Stock Investment: $8,777.00
Income Generated: $1,519.15
Percent Income Generated: 17.31%
Annualized Income Generated: 6.81%
Net Profit If Called: -$2,757.85
Percent Return If Called: -31.42%
Annualized Return If Called: -12.36%
Days Held to Expiration: 928
Trade History:
01-Aug-05 - Initial Stock Position - BTO 100 DHI @ 40.18 -
01-Aug-05 - Initial Call Option - STO 1 Aug05 40.00 Call @ 1.29 - Expired
19-Aug-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
22-Aug-05 - Continued Trade - STO 1 Oct05 40.00 Call @ 0.54 - Closed
05-Oct-05 - Buy Back & Roll Out/Down - BTC 1 Oct05 40.00 Call @ -0.11 -
24-Oct-05 - Interim Trade - STO 1 Nov05 35.00 Call @ 0.49 - Closed
31-Oct-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
18-Nov-05 - Buy Back & Roll Out/Up - BTC 1 Nov05 35.00 Call @ -0.31 -
21-Nov-05 - Continued Trade - STO 1 Dec05 40.00 Call @ 0.34 - Expired
09-Jan-06 - Continued Trade - STO 1 Jan06 40.00 Call @ 0.49 - Expired
23-Jan-06 - Continued Trade - STO 1 Feb06 40.00 Call @ 0.69 - Expired
10-Feb-06 - Dividend Received - DIV 100 Dividend @ 0.10 -
21-Feb-06 - Continued Trade - STO 1 Apr06 40.00 Call @ 0.44 - Closed
23-Mar-06 - Buy Back & Roll Out - BTC 1 Apr06 40.00 Call @ -0.11 -
23-Mar-06 - Continued Trade - STO 1 Aug06 40.00 Call @ 0.94 -
19-May-06 - Dividend Received - DIV 100 Dividend @ 0.10 -
23-May-06 - Buy Back & Roll Out/Down - BTC 1 Aug06 40.00 Call @ -0.11 - Closed
23-May-06 - Dollar Cost Averaging - BTO 100 DHI @ 26.89 -
23-May-06 - Combined Cost Basis - $6,706.00 200 @ 33.53 -
23-May-06 - Continued Trade - STO 2 Jan07 35.00 Call @ 1.04 -
25-Jul-06 - Buy Back & Roll Down - BTC 2 Jan07 35.00 Call @ -0.16 - Closed
25-Jul-06 - Dollar Cost Averaging - BTO 100 DHI @ 20.70 -
25-Jul-06 - Combined Cost Basis - $8,777.00 300 @ 29.26 -
25-Jul-06 - Interim Trade - STO 3 Jan07 25.00 Call @ 0.99 - Closed
01-Nov-06 - Dividend Received - DIV 300 Dividend @ 0.15 -
19-Dec-06 - Buy Back & Roll Up - BTC 3 Jan07 25.00 Call @ -2.36 -
19-Dec-06 - Continued Trade - STO 3 Jan08 30.00 Call @ 2.74 - Expired
09-Feb-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
18-May-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
27-Aug-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
16-Nov-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
24-Jan-08 - Interim Trade - STO 3 Feb08 15.00 Call @ 0.69 -
24-Jan-08 - Interim Trade - STO 3 Feb08 15.00 Call @ 0.69 -
Current Position Summary:
Stock Investment: $8,777.00
Income Generated: $1,519.15
Percent Income Generated: 17.31%
Annualized Income Generated: 6.81%
Net Profit If Called: -$2,757.85
Percent Return If Called: -31.42%
Annualized Return If Called: -12.36%
Days Held to Expiration: 928
Trade History:
01-Aug-05 - Initial Stock Position - BTO 100 DHI @ 40.18 -
01-Aug-05 - Initial Call Option - STO 1 Aug05 40.00 Call @ 1.29 - Expired
19-Aug-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
22-Aug-05 - Continued Trade - STO 1 Oct05 40.00 Call @ 0.54 - Closed
05-Oct-05 - Buy Back & Roll Out/Down - BTC 1 Oct05 40.00 Call @ -0.11 -
24-Oct-05 - Interim Trade - STO 1 Nov05 35.00 Call @ 0.49 - Closed
31-Oct-05 - Dividend Received - DIV 100 Dividend @ 0.09 -
18-Nov-05 - Buy Back & Roll Out/Up - BTC 1 Nov05 35.00 Call @ -0.31 -
21-Nov-05 - Continued Trade - STO 1 Dec05 40.00 Call @ 0.34 - Expired
09-Jan-06 - Continued Trade - STO 1 Jan06 40.00 Call @ 0.49 - Expired
23-Jan-06 - Continued Trade - STO 1 Feb06 40.00 Call @ 0.69 - Expired
10-Feb-06 - Dividend Received - DIV 100 Dividend @ 0.10 -
21-Feb-06 - Continued Trade - STO 1 Apr06 40.00 Call @ 0.44 - Closed
23-Mar-06 - Buy Back & Roll Out - BTC 1 Apr06 40.00 Call @ -0.11 -
23-Mar-06 - Continued Trade - STO 1 Aug06 40.00 Call @ 0.94 -
19-May-06 - Dividend Received - DIV 100 Dividend @ 0.10 -
23-May-06 - Buy Back & Roll Out/Down - BTC 1 Aug06 40.00 Call @ -0.11 - Closed
23-May-06 - Dollar Cost Averaging - BTO 100 DHI @ 26.89 -
23-May-06 - Combined Cost Basis - $6,706.00 200 @ 33.53 -
23-May-06 - Continued Trade - STO 2 Jan07 35.00 Call @ 1.04 -
25-Jul-06 - Buy Back & Roll Down - BTC 2 Jan07 35.00 Call @ -0.16 - Closed
25-Jul-06 - Dollar Cost Averaging - BTO 100 DHI @ 20.70 -
25-Jul-06 - Combined Cost Basis - $8,777.00 300 @ 29.26 -
25-Jul-06 - Interim Trade - STO 3 Jan07 25.00 Call @ 0.99 - Closed
01-Nov-06 - Dividend Received - DIV 300 Dividend @ 0.15 -
19-Dec-06 - Buy Back & Roll Up - BTC 3 Jan07 25.00 Call @ -2.36 -
19-Dec-06 - Continued Trade - STO 3 Jan08 30.00 Call @ 2.74 - Expired
09-Feb-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
18-May-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
27-Aug-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
16-Nov-07 - Dividend Received - DIV 300 Dividend @ 0.15 -
24-Jan-08 - Interim Trade - STO 3 Feb08 15.00 Call @ 0.69 -
CHS - Adjustment
The following adjustment was made today on CHS:
24-Jan-08 - Interim Trade - STO 3 Mar08 10.00 Call @ 0.59 -
Current Position Summary:
Stock Investment: $5,042.00
Income Generated: $550.80
Percent Income Generated: 10.92%
Annualized Income Generated: 14.45%
Net Profit If Called: -$1,491.20
Percent Return If Called: -29.58%
Annualized Return If Called: -39.11%
Days to Expiration: 276 days
Trade History:
19-Jun-07 - Initial Stock Position - BTO 100 CHS @ 25.11 -
19-Jun-07 - Initial Call Option - STO 1 Nov07 25.00 Call @ 2.61 - Closed
24-Oct-07 - Buy Back - BTC 1 Nov07 25.00 Call @ -0.04 -
24-Oct-07 - Dollar Cost Averaging - BTO 200 CHS @ 12.66 -
24-Oct-07 - Combined Cost Basis - $5,042.00 300 @ 16.81 -
24-Oct-07 - Interim Trade - STO 3 Dec07 15.00 Call @ 0.39 - Expired
24-Jan-08 - Interim Trade - STO 3 Mar08 10.00 Call @ 0.59 -
24-Jan-08 - Interim Trade - STO 3 Mar08 10.00 Call @ 0.59 -
Current Position Summary:
Stock Investment: $5,042.00
Income Generated: $550.80
Percent Income Generated: 10.92%
Annualized Income Generated: 14.45%
Net Profit If Called: -$1,491.20
Percent Return If Called: -29.58%
Annualized Return If Called: -39.11%
Days to Expiration: 276 days
Trade History:
19-Jun-07 - Initial Stock Position - BTO 100 CHS @ 25.11 -
19-Jun-07 - Initial Call Option - STO 1 Nov07 25.00 Call @ 2.61 - Closed
24-Oct-07 - Buy Back - BTC 1 Nov07 25.00 Call @ -0.04 -
24-Oct-07 - Dollar Cost Averaging - BTO 200 CHS @ 12.66 -
24-Oct-07 - Combined Cost Basis - $5,042.00 300 @ 16.81 -
24-Oct-07 - Interim Trade - STO 3 Dec07 15.00 Call @ 0.39 - Expired
24-Jan-08 - Interim Trade - STO 3 Mar08 10.00 Call @ 0.59 -
Tuesday, January 22, 2008
An Interesting Day on Fall Street
Well, that was sure an interesting day on Wall Street, or as I've heard it called lately, Fall Street ;-)
The markets opened down over 4% after the European and Asian stock market meltdown over the past couple of days. I think the Fed rate cut helped us from going into a free fall. It sure seemed to help the financials and retail stocks, of which I have a few.
Amazingly, my CC portfolio did rather well today, up on average about 3%, while the benchmark index, VTI was down 1.05%. The best performer was CHS up over 13% and the worst performer was SNDK down 2.78%. I had 17 stocks rise and only 8 decline. Not a bad day under the circumstances.
Another interesting fact is that the two dividend ETF's that I've been tracking lately, PEY, which tracks the Mergent High Yield Dividend Achievers, and SDY, which tracks the S&P 500 Dividend Aristocrats, both ended the day up 2.31% and 1.13% respectively. So it appears there was a flight to quality and high yield, maybe due to interest rates being cut.
I didn't do any trades today, and may not for a couple of days. I'm only about 75% invested and have plenty of cash, but I want to wait until the markets settles down before making any adjustments or establishing any new positions. I'm in no hurry so it's a good time to be patient.
The markets opened down over 4% after the European and Asian stock market meltdown over the past couple of days. I think the Fed rate cut helped us from going into a free fall. It sure seemed to help the financials and retail stocks, of which I have a few.
Amazingly, my CC portfolio did rather well today, up on average about 3%, while the benchmark index, VTI was down 1.05%. The best performer was CHS up over 13% and the worst performer was SNDK down 2.78%. I had 17 stocks rise and only 8 decline. Not a bad day under the circumstances.
Another interesting fact is that the two dividend ETF's that I've been tracking lately, PEY, which tracks the Mergent High Yield Dividend Achievers, and SDY, which tracks the S&P 500 Dividend Aristocrats, both ended the day up 2.31% and 1.13% respectively. So it appears there was a flight to quality and high yield, maybe due to interest rates being cut.
I didn't do any trades today, and may not for a couple of days. I'm only about 75% invested and have plenty of cash, but I want to wait until the markets settles down before making any adjustments or establishing any new positions. I'm in no hurry so it's a good time to be patient.
Friday, January 18, 2008
How Dividends Effect Option Pricing
There are four major factors that influence the price of an option:
1. The price of the underlying stock.
2. The strike price of the option.
3. The time remaining until option expiration.
4. The volatility of the underlying stock.
In addition, there are two minor factors:
5. The current risk-free interest rate.
6. The dividend rate of the underlying stock.
This article will explain how dividends effect the price of call and put options, and how we can use either covered calls (CC) or cash secured puts (CSP) to capture the dividend.
There are four major dates in the process of a company paying dividends:
1. Declaration date – This is the date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend.
2. Ex-dividend date – On (or after) this date the security trades without its dividend. If you buy a dividend paying stock one day before the ex-dividend you will still get the dividend, but if you buy on the ex-dividend date, you won't get the dividend. Conversely, if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day. The ex-date is the second business day before the date of record.
3. Date of record – This is the date on which the company looks at its records to see who the shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout.
4. Date of payment (payable date) – This is the date the company mails out the dividend to the holder of record. This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled.
The Ex-Dividend date is the most important date in the dividend process. On this date the stock price is guaranteed to drop by the amount of the dividend. This tends to lower the call option premiums and raise the put option premiums. The larger the dividend the lower the price of the call option and the higher the price of the put option. This happens because as the stock price is lowered by the dividend, the call becomes less valuable and the put becomes more valuable.
For example, let's say a stock is trading at $25 and it pays a $2 annual dividend. In 6 months it would pay $1 in dividends and, if all else stayed the same, the stock would be worth $24. A 6 month 25 strike call option would then be out-of-the-money (OTM), whereas a 6 month 25 strike put option would be in-the-money (ITM). In anticipation of this adjustment the call premium would be lower and the put premium would be higher.
One way to capture the dividend is by establishing a covered call (CC) position just prior to Ex-Dividend date, as I did with BBT on 1/7. Another way is to sell a cash secured put (CSP), which has an identical risk profile and provides similar returns as CC's, if done at the same strike.
Let's look at the BBT covered call (CC) trade I established on 1/7 and compared it to doing a cash secured put (CSP). With the stock trading at $28.12 (ask) and the Feb 27.50 Call could be sold for $1.64 (bid) and the Feb 27.50 Put could be sold for $1.45 (bid). The Ex-Dividend date for BBT was 1/9, or two days after the position was established. BBT pays $1.84/year in dividends, or $0.46/quarter. The price of BBT on 1/9 was therefore reduced by $0.46.
Here's a summary of the CC position I established:
Summary without the dividend:
Stock Investment: $2,812.00
Income Generated: $164.00
Percent Income Generated: 5.83%
Annualized Income Generated: 54.58%
Net Profit If Called: $102.00
Percent Return If Called: 3.63%
Annualized Return If Called: 33.95%
Days to Expiration: 39 days
Summary with the dividend:
Stock Investment: $2,812.00
Income Generated: $210.00
Percent Income Generated: 7.47%
Annualized Income Generated: 69.89%
Net Profit If Called: $148.00
Percent Return If Called: 5.26%
Annualized Return If Called: 49.26%
Days to Expiration: 39 days
Here's a summary of a possible CSP position:
Cash to Secure Put: $2,750.00
Income Generated: $144.00
Percent Income Generated: 5.24%
Annualized Income Generated: 49.01%
Net Profit If Expired: $144.00
Percent Return If Expired: 5.24%
Annualized Return If Expired: 49.01%
Days to Expiration: 39 days
The CC position requires $2,812 in cash to be spent purchasing the stock, whereas the CSP position leaves the $2,750 in cash in the account to earn interest. Obviously, a CSP will generate more interest than a CC. This is important to understand when calculating your total return.
The returns above represents the profit if the call is assigned and the put expires worthless. The CC returns $102, without the dividend, and the CSP returns $144. Add in the dividend for the CC and the return is $148, which is $4 more than the CSP. However, when you add the interest (assuming 4% annual interest for 39 days) on the cash left in the account for both cases, the CSP comes out ahead at $156.64 vs $148.70 or 52.11% annualized vs 49.47% annualized.
So, given this example I would have been slightly better off doing a CSP vs a CC, since the dividend is already priced into the put premium and the interest earned on the extra cash left in the account makes it more profitable.
So, if you would like to accumulate shares of dividend paying stocks, then you might want to consider cash secured puts. If the put expires worthless you still get paid the dividend, in the form of added put premium, and if the put is assigned you buy the shares you wanted anyway but at a lower price.
Probably the best method is to compare both a covered call and a cash secured put position, as I did here, and chose the one with the greater return.
1. The price of the underlying stock.
2. The strike price of the option.
3. The time remaining until option expiration.
4. The volatility of the underlying stock.
In addition, there are two minor factors:
5. The current risk-free interest rate.
6. The dividend rate of the underlying stock.
This article will explain how dividends effect the price of call and put options, and how we can use either covered calls (CC) or cash secured puts (CSP) to capture the dividend.
There are four major dates in the process of a company paying dividends:
1. Declaration date – This is the date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend.
2. Ex-dividend date – On (or after) this date the security trades without its dividend. If you buy a dividend paying stock one day before the ex-dividend you will still get the dividend, but if you buy on the ex-dividend date, you won't get the dividend. Conversely, if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day. The ex-date is the second business day before the date of record.
3. Date of record – This is the date on which the company looks at its records to see who the shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout.
4. Date of payment (payable date) – This is the date the company mails out the dividend to the holder of record. This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled.
The Ex-Dividend date is the most important date in the dividend process. On this date the stock price is guaranteed to drop by the amount of the dividend. This tends to lower the call option premiums and raise the put option premiums. The larger the dividend the lower the price of the call option and the higher the price of the put option. This happens because as the stock price is lowered by the dividend, the call becomes less valuable and the put becomes more valuable.
For example, let's say a stock is trading at $25 and it pays a $2 annual dividend. In 6 months it would pay $1 in dividends and, if all else stayed the same, the stock would be worth $24. A 6 month 25 strike call option would then be out-of-the-money (OTM), whereas a 6 month 25 strike put option would be in-the-money (ITM). In anticipation of this adjustment the call premium would be lower and the put premium would be higher.
One way to capture the dividend is by establishing a covered call (CC) position just prior to Ex-Dividend date, as I did with BBT on 1/7. Another way is to sell a cash secured put (CSP), which has an identical risk profile and provides similar returns as CC's, if done at the same strike.
Let's look at the BBT covered call (CC) trade I established on 1/7 and compared it to doing a cash secured put (CSP). With the stock trading at $28.12 (ask) and the Feb 27.50 Call could be sold for $1.64 (bid) and the Feb 27.50 Put could be sold for $1.45 (bid). The Ex-Dividend date for BBT was 1/9, or two days after the position was established. BBT pays $1.84/year in dividends, or $0.46/quarter. The price of BBT on 1/9 was therefore reduced by $0.46.
Here's a summary of the CC position I established:
Summary without the dividend:
Stock Investment: $2,812.00
Income Generated: $164.00
Percent Income Generated: 5.83%
Annualized Income Generated: 54.58%
Net Profit If Called: $102.00
Percent Return If Called: 3.63%
Annualized Return If Called: 33.95%
Days to Expiration: 39 days
Summary with the dividend:
Stock Investment: $2,812.00
Income Generated: $210.00
Percent Income Generated: 7.47%
Annualized Income Generated: 69.89%
Net Profit If Called: $148.00
Percent Return If Called: 5.26%
Annualized Return If Called: 49.26%
Days to Expiration: 39 days
Here's a summary of a possible CSP position:
Cash to Secure Put: $2,750.00
Income Generated: $144.00
Percent Income Generated: 5.24%
Annualized Income Generated: 49.01%
Net Profit If Expired: $144.00
Percent Return If Expired: 5.24%
Annualized Return If Expired: 49.01%
Days to Expiration: 39 days
The CC position requires $2,812 in cash to be spent purchasing the stock, whereas the CSP position leaves the $2,750 in cash in the account to earn interest. Obviously, a CSP will generate more interest than a CC. This is important to understand when calculating your total return.
The returns above represents the profit if the call is assigned and the put expires worthless. The CC returns $102, without the dividend, and the CSP returns $144. Add in the dividend for the CC and the return is $148, which is $4 more than the CSP. However, when you add the interest (assuming 4% annual interest for 39 days) on the cash left in the account for both cases, the CSP comes out ahead at $156.64 vs $148.70 or 52.11% annualized vs 49.47% annualized.
So, given this example I would have been slightly better off doing a CSP vs a CC, since the dividend is already priced into the put premium and the interest earned on the extra cash left in the account makes it more profitable.
So, if you would like to accumulate shares of dividend paying stocks, then you might want to consider cash secured puts. If the put expires worthless you still get paid the dividend, in the form of added put premium, and if the put is assigned you buy the shares you wanted anyway but at a lower price.
Probably the best method is to compare both a covered call and a cash secured put position, as I did here, and chose the one with the greater return.
KCI - Adjustment
The following adjustment was made today on KCI:
18-Jan-08 - Buy Back & Roll Out - BTC 2 Jan08 50.00 Call @ -0.16 -
18-Jan-08 - Continued Trade - STO 2 Feb08 50.00 Call @ 2.39 -
Current Position Summary:
Stock Investment: $10,970.00
Breakeven Price: $47.17
Income Generated: $1,535.70
Percent Income Generated: 14.00%
Annualized Income Generated: 5.51%
Net Profit If Called: $565.70
Percent Return If Called: 5.16%
Annualized Return If Called: 2.03%
Days Held to Expiration: 928 days
Trade History:
01-Aug-05 - Initial Stock Position - BTO 100 KCI @ 59.83 -
01-Aug-05 - Initial Call Option - STO 1 Aug05 60.00 Call @ 1.69 - Expired
22-Aug-05 - Continued Trade - STO 1 Sep05 60.00 Call @ 1.29 - Expired
19-Sep-05 - Continued Trade - STO 1 Oct05 60.00 Call @ 0.54 - Closed
06-Oct-05 - Buy Back & Roll Out - BTC 1 Oct05 60.00 Call @ -0.11 -
25-Oct-05 - Continued Trade - STO 1 Nov05 60.00 Call @ 0.44 - Closed
28-Oct-05 - Buy Back & Roll Down - BTC 1 Nov05 60.00 Call @ -0.11 -
28-Oct-05 - Interim Trade - STO 1 Nov05 35.00 Call @ 2.04 - Closed
14-Nov-05 - Buy Back & Roll Out/Up - BTC 1 Nov05 35.00 Call @ -4.11 -
23-Nov-05 - Interim Trade - STO 1 Jan06 45.00 Call @ 0.69 - Expired
23-Jan-06 - Interim Trade - STO 1 Feb06 45.00 Call @ 0.39 - Expired
21-Feb-06 - Interim Trade - STO 1 Mar06 45.00 Call @ 0.09 - Expired
20-Mar-06 - Interim Trade - STO 1 Sep06 45.00 Call @ 4.59 - Expired
18-Sep-06 - Interim Trade - STO 1 Dec06 35.00 Call @ 0.94 - Closed
05-Dec-06 - Buy Back & Roll Out/Up - BTC 1 Dec06 35.00 Call @ -3.69 -
05-Dec-06 - Interim Trade - STO 1 Jun07 40.00 Call @ 4.00 - Closed
23-May-07 - Buy Back & Roll Out/Up - BTC 1 Jun07 40.00 Call @ -10.21 -
23-May-07 - Dollar Cost Averaging - BTO 100 KCI @ 49.87 -
23-May-07 - Combined Cost Basis - $10,970.00 200 @ 54.85 -
23-May-07 - Interim Trade - STO 2 Jan08 50.00 Call @ 6.20 - Closed
18-Jan-08 - Buy Back & Roll Out - BTC 2 Jan08 50.00 Call @ -0.16 -
18-Jan-08 - Continued Trade - STO 2 Feb08 50.00 Call @ 2.39 -
18-Jan-08 - Buy Back & Roll Out - BTC 2 Jan08 50.00 Call @ -0.16 -
18-Jan-08 - Continued Trade - STO 2 Feb08 50.00 Call @ 2.39 -
Current Position Summary:
Stock Investment: $10,970.00
Breakeven Price: $47.17
Income Generated: $1,535.70
Percent Income Generated: 14.00%
Annualized Income Generated: 5.51%
Net Profit If Called: $565.70
Percent Return If Called: 5.16%
Annualized Return If Called: 2.03%
Days Held to Expiration: 928 days
Trade History:
01-Aug-05 - Initial Stock Position - BTO 100 KCI @ 59.83 -
01-Aug-05 - Initial Call Option - STO 1 Aug05 60.00 Call @ 1.69 - Expired
22-Aug-05 - Continued Trade - STO 1 Sep05 60.00 Call @ 1.29 - Expired
19-Sep-05 - Continued Trade - STO 1 Oct05 60.00 Call @ 0.54 - Closed
06-Oct-05 - Buy Back & Roll Out - BTC 1 Oct05 60.00 Call @ -0.11 -
25-Oct-05 - Continued Trade - STO 1 Nov05 60.00 Call @ 0.44 - Closed
28-Oct-05 - Buy Back & Roll Down - BTC 1 Nov05 60.00 Call @ -0.11 -
28-Oct-05 - Interim Trade - STO 1 Nov05 35.00 Call @ 2.04 - Closed
14-Nov-05 - Buy Back & Roll Out/Up - BTC 1 Nov05 35.00 Call @ -4.11 -
23-Nov-05 - Interim Trade - STO 1 Jan06 45.00 Call @ 0.69 - Expired
23-Jan-06 - Interim Trade - STO 1 Feb06 45.00 Call @ 0.39 - Expired
21-Feb-06 - Interim Trade - STO 1 Mar06 45.00 Call @ 0.09 - Expired
20-Mar-06 - Interim Trade - STO 1 Sep06 45.00 Call @ 4.59 - Expired
18-Sep-06 - Interim Trade - STO 1 Dec06 35.00 Call @ 0.94 - Closed
05-Dec-06 - Buy Back & Roll Out/Up - BTC 1 Dec06 35.00 Call @ -3.69 -
05-Dec-06 - Interim Trade - STO 1 Jun07 40.00 Call @ 4.00 - Closed
23-May-07 - Buy Back & Roll Out/Up - BTC 1 Jun07 40.00 Call @ -10.21 -
23-May-07 - Dollar Cost Averaging - BTO 100 KCI @ 49.87 -
23-May-07 - Combined Cost Basis - $10,970.00 200 @ 54.85 -
23-May-07 - Interim Trade - STO 2 Jan08 50.00 Call @ 6.20 - Closed
18-Jan-08 - Buy Back & Roll Out - BTC 2 Jan08 50.00 Call @ -0.16 -
18-Jan-08 - Continued Trade - STO 2 Feb08 50.00 Call @ 2.39 -
Monday, January 14, 2008
WFMI - Adjustment
The following adjustment was made today on WFMI:
14-Jan-08 - Continued Trade - STO 2 May08 45.00 Call @ 1.45 -
Current Position Summary:
Stock Investment: $8,563.00
Income Generated: $1,124.60
Percent Income Generated: 13.13%
Annualized Income Generated: 12.32%
Net Profit If Called: $1,561.60
Percent Return If Called: 18.24%
Annualized Return If Called: 17.11%
Days Held to Expiration: 389 days
Trade History:
23-Apr-07 - Initial Stock Position - BTO 100 WFMI @ 47.19 - VICC
23-Apr-07 - Initial Call Option - STO 1 May07 50.00 Call @ 0.83 - Expired
21-May-07 - Interim Trade - STO 1 Jul07 45.00 Call @ 0.24 - Closed
21-Jun-07 - Buy Back and Roll Out - BTC 1 Jul07 45.00 Call @ -0.03 -
21-Jun-07 - Dollar Cost Averaging - BTO 100 WFMI @ 38.44 -
21-Jun-07 - Combined Cost Basis - $8,563.00 200 @ 42.82 -
21-Jun-07 - Continued Trade - STO 2 Aug07 45.00 Call @ 0.29 - Expired
24-Jul-07 - Dividend Received - DIV 200 Dividend @ 0.18 -
20-Aug-07 - Continued Trade - STO 2 Sep07 50.00 Call @ 0.20 - Expired
24-Sep-07 - Continued Trade - STO 2 Oct07 50.00 Call @ 0.16 - Expired
22-Oct-07 - Continued Trade - STO 2 Dec07 50.00 Call @ 2.64 - Expired
14-Jan-08 - Continued Trade - STO 2 May08 45.00 Call @ 1.45 -
14-Jan-08 - Continued Trade - STO 2 May08 45.00 Call @ 1.45 -
Current Position Summary:
Stock Investment: $8,563.00
Income Generated: $1,124.60
Percent Income Generated: 13.13%
Annualized Income Generated: 12.32%
Net Profit If Called: $1,561.60
Percent Return If Called: 18.24%
Annualized Return If Called: 17.11%
Days Held to Expiration: 389 days
Trade History:
23-Apr-07 - Initial Stock Position - BTO 100 WFMI @ 47.19 - VICC
23-Apr-07 - Initial Call Option - STO 1 May07 50.00 Call @ 0.83 - Expired
21-May-07 - Interim Trade - STO 1 Jul07 45.00 Call @ 0.24 - Closed
21-Jun-07 - Buy Back and Roll Out - BTC 1 Jul07 45.00 Call @ -0.03 -
21-Jun-07 - Dollar Cost Averaging - BTO 100 WFMI @ 38.44 -
21-Jun-07 - Combined Cost Basis - $8,563.00 200 @ 42.82 -
21-Jun-07 - Continued Trade - STO 2 Aug07 45.00 Call @ 0.29 - Expired
24-Jul-07 - Dividend Received - DIV 200 Dividend @ 0.18 -
20-Aug-07 - Continued Trade - STO 2 Sep07 50.00 Call @ 0.20 - Expired
24-Sep-07 - Continued Trade - STO 2 Oct07 50.00 Call @ 0.16 - Expired
22-Oct-07 - Continued Trade - STO 2 Dec07 50.00 Call @ 2.64 - Expired
14-Jan-08 - Continued Trade - STO 2 May08 45.00 Call @ 1.45 -
SNDK - Adjustment
The following adjustment was made today on SNDK:
14-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 0.85
This is another position where I sold a lower strike call which would result in a small profit if called. Again, I'll monitor this one like an interim trade and roll it out/up to avoid assigned if it should be ITM at expiration.
Current Position Summary:
Stock Investment: $10,854.00
Income Generated: $3,601.30
Percent Income Generated: 33.18%
Annualized Income Generated: 18.29%
Net Profit If Called: -$252.70
Percent Return If Called: -2.33%
Annualized Return If Called: -1.28%
Days Held to Expiration: 662 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 SNDK @ 59.56 -
24-Apr-06 - Initial Call Option - STO 1 Jul06 57.50 Call @ 7.09 - Closed
06-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Jul06 57.50 Call @ -0.16 -
06-Jul-06 - Dollar Cost Averaging - BTO 100 SNDK @ 48.98 -
06-Jul-06 - Combined Cost Basis - $10,854.00 200 @ 54.27 -
06-Jul-06 - Continued Trade - STO 2 Oct06 55.00 Call @ 3.39 - Expired
23-Oct-06 - Continued Trade - STO 2 Jan07 55.00 Call @ 2.14 - Closed
19-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 55.00 Call @ -0.16 -
19-Dec-06 - Continued Trade - STO 2 Feb07 50.00 Call @ 1.69 - Closed
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Interim Trade - STO 2 Apr07 45.00 Call @ 1.39 - Expired
27-Apr-07 - Interim Trade - STO 2 May07 45.00 Call @ 0.84 - Expired
21-May-07 - Interim Trade - STO 2 Jun07 45.00 Call @ 0.98 - Closed
15-Jun-07 - Buy Back & Roll Out/Up - BTC 2 Jun07 45.00 Call @ -1.46 -
15-Jun-07 - Continued Trade - STO 2 Oct07 50.00 Call @ 2.60 - Expired
22-Oct-07 - Continued Trade - STO 2 Nov07 45.00 Call @ 1.64 - Expired
20-Nov-07 - Continued Trade - STO 2 Dec07 40.00 Call @ 0.67 - Expired
14-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 0.85
14-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 0.85
This is another position where I sold a lower strike call which would result in a small profit if called. Again, I'll monitor this one like an interim trade and roll it out/up to avoid assigned if it should be ITM at expiration.
Current Position Summary:
Stock Investment: $10,854.00
Income Generated: $3,601.30
Percent Income Generated: 33.18%
Annualized Income Generated: 18.29%
Net Profit If Called: -$252.70
Percent Return If Called: -2.33%
Annualized Return If Called: -1.28%
Days Held to Expiration: 662 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 SNDK @ 59.56 -
24-Apr-06 - Initial Call Option - STO 1 Jul06 57.50 Call @ 7.09 - Closed
06-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Jul06 57.50 Call @ -0.16 -
06-Jul-06 - Dollar Cost Averaging - BTO 100 SNDK @ 48.98 -
06-Jul-06 - Combined Cost Basis - $10,854.00 200 @ 54.27 -
06-Jul-06 - Continued Trade - STO 2 Oct06 55.00 Call @ 3.39 - Expired
23-Oct-06 - Continued Trade - STO 2 Jan07 55.00 Call @ 2.14 - Closed
19-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 55.00 Call @ -0.16 -
19-Dec-06 - Continued Trade - STO 2 Feb07 50.00 Call @ 1.69 - Closed
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Interim Trade - STO 2 Apr07 45.00 Call @ 1.39 - Expired
27-Apr-07 - Interim Trade - STO 2 May07 45.00 Call @ 0.84 - Expired
21-May-07 - Interim Trade - STO 2 Jun07 45.00 Call @ 0.98 - Closed
15-Jun-07 - Buy Back & Roll Out/Up - BTC 2 Jun07 45.00 Call @ -1.46 -
15-Jun-07 - Continued Trade - STO 2 Oct07 50.00 Call @ 2.60 - Expired
22-Oct-07 - Continued Trade - STO 2 Nov07 45.00 Call @ 1.64 - Expired
20-Nov-07 - Continued Trade - STO 2 Dec07 40.00 Call @ 0.67 - Expired
14-Jan-08 - Interim Trade - STO 2 Feb08 35.00 Call @ 0.85
PLCM - Adjustment
The following adjustment was made today on PLCM:
14-Jan-08 - Interim Trade - STO 1 Feb08 25.00 Call @ 0.78 -
Current Position Summary:
Stock Investment: $3,164.00
Income Generated: $473.00
Percent Income Generated: 14.95%
Annualized Income Generated: 30.48%
Net Profit If Called: -$191.00
Percent Return If Called: -6.04%
Annualized Return If Called: -12.31%
Days Held to Expiration: 179 days
Trade History:
20-Aug-07 - Initial Stock Position - BTO 100 PLCM @ 31.64 -
20-Aug-07 - Initial Call Option - STO 1 Sep07 30.00 Call @ 2.55 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 30.00 Call @ 0.34 - Expired
22-Oct-07 - Continued Trade - STO 1 Nov07 30.00 Call @ 0.79 - Expired
20-Nov-07 - Continued Trade - STO 1 Dec07 30.00 Call @ 0.27 - Expired
14-Jan-08 - Interim Trade - STO 1 Feb08 25.00 Call @ 0.78 -
14-Jan-08 - Interim Trade - STO 1 Feb08 25.00 Call @ 0.78 -
Current Position Summary:
Stock Investment: $3,164.00
Income Generated: $473.00
Percent Income Generated: 14.95%
Annualized Income Generated: 30.48%
Net Profit If Called: -$191.00
Percent Return If Called: -6.04%
Annualized Return If Called: -12.31%
Days Held to Expiration: 179 days
Trade History:
20-Aug-07 - Initial Stock Position - BTO 100 PLCM @ 31.64 -
20-Aug-07 - Initial Call Option - STO 1 Sep07 30.00 Call @ 2.55 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 30.00 Call @ 0.34 - Expired
22-Oct-07 - Continued Trade - STO 1 Nov07 30.00 Call @ 0.79 - Expired
20-Nov-07 - Continued Trade - STO 1 Dec07 30.00 Call @ 0.27 - Expired
14-Jan-08 - Interim Trade - STO 1 Feb08 25.00 Call @ 0.78 -
CRI - Adjustment
The following adjustment was made today on CRI:
14-Jan-08 - Interim Trade - STO 1 Mar08 20.00 Call @ 0.49 -
Current Position Summary:
Stock Investment: $2,654.00
Income Generated: $417.00
Percent Income Generated: 15.71%
Annualized Income Generated: 20.78%
Net Profit If Called: -$237.00
Percent Return If Called: -8.93%
Annualized Return If Called: -11.81%
Days Held to Expiration: 276 days
Trade History:
19-Jun-07 - Initial Stock Position - BTO 100 CRI @ 26.54 -
19-Jun-07 - Initial Call Option - STO 1 Sep07 25.00 Call @ 2.99 - Expired
24-Sep-07 - Interim Trade - STO 1 Dec07 22.50 Call @ 0.69 - Expired
14-Jan-08 - Interim Trade - STO 1 Mar08 20.00 Call @ 0.49 -
14-Jan-08 - Interim Trade - STO 1 Mar08 20.00 Call @ 0.49 -
Current Position Summary:
Stock Investment: $2,654.00
Income Generated: $417.00
Percent Income Generated: 15.71%
Annualized Income Generated: 20.78%
Net Profit If Called: -$237.00
Percent Return If Called: -8.93%
Annualized Return If Called: -11.81%
Days Held to Expiration: 276 days
Trade History:
19-Jun-07 - Initial Stock Position - BTO 100 CRI @ 26.54 -
19-Jun-07 - Initial Call Option - STO 1 Sep07 25.00 Call @ 2.99 - Expired
24-Sep-07 - Interim Trade - STO 1 Dec07 22.50 Call @ 0.69 - Expired
14-Jan-08 - Interim Trade - STO 1 Mar08 20.00 Call @ 0.49 -
BJS - Adjustment
The following adjustment was made today on BJS:
14-Jan-08 - Interim Trade - STO 3 Apr08 27.50 Call @ 0.64 -
Current Position Summary:
Stock Investment: $11,238.00
Income Generated: $2,384.55
Percent Income Generated: 21.22%
Annualized Income Generated: 9.51%
Net Profit If Called: -$603.45
Percent Return If Called: -5.37%
Annualized Return If Called: -2.41%
Days Held to Expiration: 814 days
Trade History:
25-Jan-06 - Initial Stock Position - BTO 200 BJS @ 40.05 -
25-Jan-06 - Initial Call Option - STO 2 Feb06 40.00 Call @ 1.54 - Expired
21-Feb-06 - Continued Trade - STO 2 Apr06 40.00 Call @ 0.49 - Closed
20-Mar-06 - Buy Back - BTC 2 Apr06 40.00 Call @ -0.11 -
20-Mar-06 - Dollar Cost Averaging - BTO 100 BJS @ 32.29 -
20-Mar-06 - Combined Cost Basis - $11,238.00 300 @ 37.46 -
20-Mar-06 - Continued Trade - STO 3 Jul05 37.50 Call @ 0.94 - Expired
14-Jul-06 - Dividend Received - DIV 100 Dividend @ 0.15 -
24-Jul-06 - Interim Trade - STO 3 Oct06 35.00 Call @ 1.19 -
13-Oct-06 - Dividend Received - DIV 300 Dividend @ 0.05 -
23-Oct-06 - Interim Trade - STO 3 Jan07 35.00 Call @ 0.79 -
22-Dec-06 - Buy Back & Roll Out - BTC 3 Jan07 35.00 Call @ -0.11 - Closed
22-Dec-06 - Continued Trade - STO 3 Jul07 35.00 Call @ 1.66 - Closed
12-Jan-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
13-Apr-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
21-Jun-07 - Buy Back & Roll Out/Down - BTC 3 Jul07 35.00 Call @ -0.11 - Closed
21-Jun-07 - Interim Trade - STO 3 Oct07 32.50 Call @ 0.79 - Expired
13-Jul-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
12-Oct-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
30-Oct-07 - Interim Trade - STO 3 Dec07 27.50 Call @ 0.55 - Expired
14-Jan-08 - Interim Trade - STO 3 Apr08 27.50 Call @ 0.64 -
14-Jan-08 - Interim Trade - STO 3 Apr08 27.50 Call @ 0.64 -
Current Position Summary:
Stock Investment: $11,238.00
Income Generated: $2,384.55
Percent Income Generated: 21.22%
Annualized Income Generated: 9.51%
Net Profit If Called: -$603.45
Percent Return If Called: -5.37%
Annualized Return If Called: -2.41%
Days Held to Expiration: 814 days
Trade History:
25-Jan-06 - Initial Stock Position - BTO 200 BJS @ 40.05 -
25-Jan-06 - Initial Call Option - STO 2 Feb06 40.00 Call @ 1.54 - Expired
21-Feb-06 - Continued Trade - STO 2 Apr06 40.00 Call @ 0.49 - Closed
20-Mar-06 - Buy Back - BTC 2 Apr06 40.00 Call @ -0.11 -
20-Mar-06 - Dollar Cost Averaging - BTO 100 BJS @ 32.29 -
20-Mar-06 - Combined Cost Basis - $11,238.00 300 @ 37.46 -
20-Mar-06 - Continued Trade - STO 3 Jul05 37.50 Call @ 0.94 - Expired
14-Jul-06 - Dividend Received - DIV 100 Dividend @ 0.15 -
24-Jul-06 - Interim Trade - STO 3 Oct06 35.00 Call @ 1.19 -
13-Oct-06 - Dividend Received - DIV 300 Dividend @ 0.05 -
23-Oct-06 - Interim Trade - STO 3 Jan07 35.00 Call @ 0.79 -
22-Dec-06 - Buy Back & Roll Out - BTC 3 Jan07 35.00 Call @ -0.11 - Closed
22-Dec-06 - Continued Trade - STO 3 Jul07 35.00 Call @ 1.66 - Closed
12-Jan-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
13-Apr-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
21-Jun-07 - Buy Back & Roll Out/Down - BTC 3 Jul07 35.00 Call @ -0.11 - Closed
21-Jun-07 - Interim Trade - STO 3 Oct07 32.50 Call @ 0.79 - Expired
13-Jul-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
12-Oct-07 - Dividend Received - DIV 300 Dividend @ 0.05 -
30-Oct-07 - Interim Trade - STO 3 Dec07 27.50 Call @ 0.55 - Expired
14-Jan-08 - Interim Trade - STO 3 Apr08 27.50 Call @ 0.64 -
Saturday, January 12, 2008
A Dividend Approach to Retirement
I just started reading The Ultimate Dividend Playbook: Income, Insight and Independence for Today's Investor by Josh Peters and already I can see the value of investing in dividend paying stocks for retirement. When I went looking for an income strategy a few years ago I completely ignored dividends, since I thought the yields were too low. So, I decided to use covered calls instead, which offer a much greater yield, at least initially. However, as I've discovered over time, the yield on covered calls is at the whim of Mr. Market. When stock prices decline so do the option premiums, so what may start out as a high yield position can quickly become a low yield position.
The are many possible ways in which to fund retirement withdrawals, but I'll only cover two of them in this article. One is to accumulate a large portfolio of stocks and simply withdraw a portion each year by selling some stocks to raise cash. For example, if you had accumulated $1,000,000 in stock and you withdrew $50,000/year the account would last 20 years, assuming the account value remained the same. However, Mr. Market might have other ideas. Sometimes the value of the account would be high and sometimes it would be low. If you were forced to sell positions for your annual withdrawal at the lows then you would need to sell more shares to receive the same $50,000 and the account would last less than 20 years. In other words, with this method liquidation value and timing is extremely important since you're retirement is subject to the whim of Mr. Market.
The other method is to accumulate a large number of shares of dividend paying stocks and withdraw the dividends every year. The dividend payouts would not be affected by the current market value of the stocks and is therefore not subject to the whim of Mr. Market. Regardless of the value of their stocks, most companies will continue to not only pay dividends but also increase them over time. With this method you don't need to sell stocks to generate cash, so the liquidation value doesn't matter. This is a hard concept for many to accept since they equate success with a rising account value. Instead what really matters is the annual yield and dividend growth that the portfolio can generate.
For example let's look at BBT, which I just added to my portfolio. Five years ago on 1/6/03 BBT closed at $38.25. It had a dividend rate of $1.16/share for a yield of 3.03%. The closing price as of Friday 1/11/08 was $28.16 for a $10.09 or 26% decline. The current divided rate is $1.84/share for a yield of 6.53%. Although the stock price declined over the past five years, BBT continued to pay dividends totaling $7.84/share and raised the dividend 5 times for a growth rate of over 9%/year (dividend info), which is well above the rate of inflation. Today, the dividend yield is even more attractive at 6.53%. If BBT continues to pay dividends at the current rate and continues to increase the dividend every year at 9+%, does the value of the stock really matter? What really matters is the cash flow generated by the dividends, which can be withdrawn from the account to pay for living expenses without reducing the principal and future dividend payments. This is stable, sustainable, passive income, which is what you want in retirement.
Now let's look at some numbers. If you bought $1,000,000 worth of BBT on 1/6/03 at $38.25 you'd have about 26,143 shares. The value of those shares today at $28.16 would be about $736,187, which is a $263,813 loss of value. However, you would have generated dividend income of $31,894 the first year, $35,032 the second, $38,169 the third, $41,820 the fourth, $46,012 the fifth, and $12,025 so far this year, for a total of $204,961. Did the loss of $263,813 in market value have any effect on the dividend payments or dividend growth? No, it made no difference at all.
I know someone who has a few million invested in dividend paying stocks which generates over $100,000/year in dividends, every year. This person never worries about the value of his portfolio, which goes up/down by large sums that would make most people lose sleep. But he knows he can count on the income it produces every year so he sleeps very well. This is the goal of passive income, where your money works for you instead of you working for your money.
I still plan to write covered calls, and possibly cash secured puts, to enhance the income potential of my portfolio, but I'll be focusing more on accumulating shares of undervalued dividend paying stocks, since I believe these tend to be less volatile and offer a greater opportunity for stable, sustainable, passive income and income growth. This way by the time I retire, I can just sit back and collect the income without much further effort. So, I'll be revising my trading plan based on these new objectives once I finish reading Josh's book. It's going to take some time to work out all the details, but as soon as I'm done I'll post my new trading plan here, so stay tuned.
The are many possible ways in which to fund retirement withdrawals, but I'll only cover two of them in this article. One is to accumulate a large portfolio of stocks and simply withdraw a portion each year by selling some stocks to raise cash. For example, if you had accumulated $1,000,000 in stock and you withdrew $50,000/year the account would last 20 years, assuming the account value remained the same. However, Mr. Market might have other ideas. Sometimes the value of the account would be high and sometimes it would be low. If you were forced to sell positions for your annual withdrawal at the lows then you would need to sell more shares to receive the same $50,000 and the account would last less than 20 years. In other words, with this method liquidation value and timing is extremely important since you're retirement is subject to the whim of Mr. Market.
The other method is to accumulate a large number of shares of dividend paying stocks and withdraw the dividends every year. The dividend payouts would not be affected by the current market value of the stocks and is therefore not subject to the whim of Mr. Market. Regardless of the value of their stocks, most companies will continue to not only pay dividends but also increase them over time. With this method you don't need to sell stocks to generate cash, so the liquidation value doesn't matter. This is a hard concept for many to accept since they equate success with a rising account value. Instead what really matters is the annual yield and dividend growth that the portfolio can generate.
For example let's look at BBT, which I just added to my portfolio. Five years ago on 1/6/03 BBT closed at $38.25. It had a dividend rate of $1.16/share for a yield of 3.03%. The closing price as of Friday 1/11/08 was $28.16 for a $10.09 or 26% decline. The current divided rate is $1.84/share for a yield of 6.53%. Although the stock price declined over the past five years, BBT continued to pay dividends totaling $7.84/share and raised the dividend 5 times for a growth rate of over 9%/year (dividend info), which is well above the rate of inflation. Today, the dividend yield is even more attractive at 6.53%. If BBT continues to pay dividends at the current rate and continues to increase the dividend every year at 9+%, does the value of the stock really matter? What really matters is the cash flow generated by the dividends, which can be withdrawn from the account to pay for living expenses without reducing the principal and future dividend payments. This is stable, sustainable, passive income, which is what you want in retirement.
Now let's look at some numbers. If you bought $1,000,000 worth of BBT on 1/6/03 at $38.25 you'd have about 26,143 shares. The value of those shares today at $28.16 would be about $736,187, which is a $263,813 loss of value. However, you would have generated dividend income of $31,894 the first year, $35,032 the second, $38,169 the third, $41,820 the fourth, $46,012 the fifth, and $12,025 so far this year, for a total of $204,961. Did the loss of $263,813 in market value have any effect on the dividend payments or dividend growth? No, it made no difference at all.
I know someone who has a few million invested in dividend paying stocks which generates over $100,000/year in dividends, every year. This person never worries about the value of his portfolio, which goes up/down by large sums that would make most people lose sleep. But he knows he can count on the income it produces every year so he sleeps very well. This is the goal of passive income, where your money works for you instead of you working for your money.
I still plan to write covered calls, and possibly cash secured puts, to enhance the income potential of my portfolio, but I'll be focusing more on accumulating shares of undervalued dividend paying stocks, since I believe these tend to be less volatile and offer a greater opportunity for stable, sustainable, passive income and income growth. This way by the time I retire, I can just sit back and collect the income without much further effort. So, I'll be revising my trading plan based on these new objectives once I finish reading Josh's book. It's going to take some time to work out all the details, but as soon as I'm done I'll post my new trading plan here, so stay tuned.
Thursday, January 10, 2008
UPS - Adjustment
The following adjustment was made today on UPS:
10-Jan-08 - Continued Trade - STO 1 Apr08 75.00 Call @ 1.31
Current Position Summary:
Stock Investment: $7,193.00
Income Generated: $332.00
Percent Income Generated: 4.62%
Annualized Income Generated: 4.71%
Net Profit If Called: $639.00
Percent Return If Called: 8.88%
Annualized Return If Called: 9.06%
Days to Expiration: 358 days
Trade History:
26-Apr-07 - Initial Stock Position - BTO 100 UPS @ 71.93 - VICC
26-Apr-07 - Continued Trade - STO 1 May07 75.00 Call @ 0.10 - Expired
21-May-07 - Continued Trade - STO 1 Jul07 75.00 Call @ 0.39 - Closed
05-Jun-07 - Dividend Received - DIV 100 Dividend @ 0.42 -
18-Jul-07 - Buy Back & Roll Out/Up - BTC 1 Jul07 75.00 Call @ -0.56 -
18-Jul-07 - Continued Trade - STO 1 Oct07 80.00 Call @ 0.89 -
24-Oct-07 - Continued Trade - STO 1 Dec07 80.00 Call @ 0.35 - Expired
10-Jan-08 - Continued Trade - STO 1 Apr08 75.00 Call @ 1.31
10-Jan-08 - Continued Trade - STO 1 Apr08 75.00 Call @ 1.31
Current Position Summary:
Stock Investment: $7,193.00
Income Generated: $332.00
Percent Income Generated: 4.62%
Annualized Income Generated: 4.71%
Net Profit If Called: $639.00
Percent Return If Called: 8.88%
Annualized Return If Called: 9.06%
Days to Expiration: 358 days
Trade History:
26-Apr-07 - Initial Stock Position - BTO 100 UPS @ 71.93 - VICC
26-Apr-07 - Continued Trade - STO 1 May07 75.00 Call @ 0.10 - Expired
21-May-07 - Continued Trade - STO 1 Jul07 75.00 Call @ 0.39 - Closed
05-Jun-07 - Dividend Received - DIV 100 Dividend @ 0.42 -
18-Jul-07 - Buy Back & Roll Out/Up - BTC 1 Jul07 75.00 Call @ -0.56 -
18-Jul-07 - Continued Trade - STO 1 Oct07 80.00 Call @ 0.89 -
24-Oct-07 - Continued Trade - STO 1 Dec07 80.00 Call @ 0.35 - Expired
10-Jan-08 - Continued Trade - STO 1 Apr08 75.00 Call @ 1.31
MDT - Adjustment
The following adjustment was made today on MDT:
10-Jan-08 - Continued Trade - STO 1 Feb08 52.50 Call @ 0.79 -
Current Position Summary:
Stock Investment: $5,272.00
Income Generated: $314.00
Percent Income Generated: 5.96%
Annualized Income Generated: 7.30%
Net Profit If Called: $292.00
Percent Return If Called: 5.54%
Annualized Return If Called: 6.78%
Days to Expiration: 298 days
Trade History:
23-Apr-07 - Initial Stock Position - BTO 100 MDT @ 52.72 - VICC
23-Apr-07 - Continued Trade - STO 1 May07 55.00 Call @ 0.19 - Expired
21-May-07 - Continued Trade - STO 1 Jun07 52.50 Call @ 0.59 - Closed
15-Jun-07 - Buy Back & Roll Out/Up - BTC 1 Jun07 52.50 Call @ -0.06
15-Jun-07 - Initial Call Option - STO 1 Jul07 55.00 Call @ 0.49 - Expired
25-Jul-07 - Continued Trade - STO 1 Sep07 55.00 Call @ 0.63 - Closed
27-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.13
21-Sep-07 - Buy Back & Roll Out/Up - BTC 1 Sep07 55.00 Call @ -1.46
21-Sep-07 - Continued Trade - STO 1 Nov07 57.50 Call @ 1.39 - Closed
24-Oct-07 - Buy Back & Roll Down - BTC 1 Nov07 57.50 Call @ -0.06 -
24-Oct-07 - Continued Trade - STO 1 Dec07 52.50 Call @ 0.39 - Expired
26-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.13 -
10-Jan-08 - Continued Trade - STO 1 Feb08 52.50 Call @ 0.79 -
10-Jan-08 - Continued Trade - STO 1 Feb08 52.50 Call @ 0.79 -
Current Position Summary:
Stock Investment: $5,272.00
Income Generated: $314.00
Percent Income Generated: 5.96%
Annualized Income Generated: 7.30%
Net Profit If Called: $292.00
Percent Return If Called: 5.54%
Annualized Return If Called: 6.78%
Days to Expiration: 298 days
Trade History:
23-Apr-07 - Initial Stock Position - BTO 100 MDT @ 52.72 - VICC
23-Apr-07 - Continued Trade - STO 1 May07 55.00 Call @ 0.19 - Expired
21-May-07 - Continued Trade - STO 1 Jun07 52.50 Call @ 0.59 - Closed
15-Jun-07 - Buy Back & Roll Out/Up - BTC 1 Jun07 52.50 Call @ -0.06
15-Jun-07 - Initial Call Option - STO 1 Jul07 55.00 Call @ 0.49 - Expired
25-Jul-07 - Continued Trade - STO 1 Sep07 55.00 Call @ 0.63 - Closed
27-Jul-07 - Dividend Received - DIV 100 Dividend @ 0.13
21-Sep-07 - Buy Back & Roll Out/Up - BTC 1 Sep07 55.00 Call @ -1.46
21-Sep-07 - Continued Trade - STO 1 Nov07 57.50 Call @ 1.39 - Closed
24-Oct-07 - Buy Back & Roll Down - BTC 1 Nov07 57.50 Call @ -0.06 -
24-Oct-07 - Continued Trade - STO 1 Dec07 52.50 Call @ 0.39 - Expired
26-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.13 -
10-Jan-08 - Continued Trade - STO 1 Feb08 52.50 Call @ 0.79 -
KSS - Adjustment
The following adjustment was made today on KSS:
10-Jan-08 - Continued Trade - STO 1 Apr07 50.00 Call @ 0.99
Current Position Summary:
Stock Investment: $5,690.00
Income Generated: $912.00
Percent Income Generated: 16.03%
Annualized Income Generated: 28.68%
Net Profit If Called: $222.00
Percent Return If Called: 3.90%
Annualized Return If Called: 6.98%
Days to Expiration: 204 days
Trade History:
27-Sep-07 - Initial Stock Position - BTO 100 KSS @ 56.90 -
27-Sep-07 - Initial Call Option - STO 1 Oct07 55.00 Call @ 3.20 - Expired
22-Oct-07 - Continued Trade - STO 1 Nov07 55.00 Call @ 3.19 - Expired
20-Nov-07 - Continued Trade - STO 1 Dec07 50.00 Call @ 1.74 - Expired
10-Jan-08 - Continued Trade - STO 1 Apr07 50.00 Call @ 0.99
10-Jan-08 - Continued Trade - STO 1 Apr07 50.00 Call @ 0.99
Current Position Summary:
Stock Investment: $5,690.00
Income Generated: $912.00
Percent Income Generated: 16.03%
Annualized Income Generated: 28.68%
Net Profit If Called: $222.00
Percent Return If Called: 3.90%
Annualized Return If Called: 6.98%
Days to Expiration: 204 days
Trade History:
27-Sep-07 - Initial Stock Position - BTO 100 KSS @ 56.90 -
27-Sep-07 - Initial Call Option - STO 1 Oct07 55.00 Call @ 3.20 - Expired
22-Oct-07 - Continued Trade - STO 1 Nov07 55.00 Call @ 3.19 - Expired
20-Nov-07 - Continued Trade - STO 1 Dec07 50.00 Call @ 1.74 - Expired
10-Jan-08 - Continued Trade - STO 1 Apr07 50.00 Call @ 0.99
Monday, January 7, 2008
BBT - New Position
A new position was established today on BBT. The following is the trade information, including IB commissions:
Note: Actual prices were update on 1/20. The original prices were incorrect (I made a typo on my spreadsheet which I just caught). The position is now slightly more profitable with the correct prices.
07-Jan-08 - Initial Stock Position - BTO 100 BBT @ 28.03
07-Jan-08 - Initial Call Option - STO 1 Feb08 27.50 Call @ 1.63
01-Feb-08 - DIV 100 Dividend @ 0.46
Summary without the dividend:
Stock Investment: $2,803.00
Income Generated: $163.00
Percent Income Generated: 5.82%
Annualized Income Generated: 54.42%
Net Profit If Called: $110.00
Percent Return If Called: 3.92%
Annualized Return If Called: 36.73%
Days to Expiration: 39 days
Summary with the dividend:
Stock Investment: $2,803.00
Income Generated: $209.00
Percent Income Generated: 7.46%
Annualized Income Generated: 69.78%
Net Profit If Called: $156.00
Percent Return If Called: 5.57%
Annualized Return If Called: 52.09%
Days to Expiration: 39 days
BBT was recommended by Morningstar DividendInvestor. I'm using a dividend capture strategy since BBT goes ex-dividend on 1/9/08 and pays a 0.46/share dividend on 2/1/08. The annual dividend yield at my cost of $28.12 is 6.54% ((0.46*4)/28.12). This is above the 5 year average dividend yield of 3.30%, which is an indication that the stock is undervalued. The dividend information for BBT was obtained from DividendInvestor.com.
Note: Actual prices were update on 1/20. The original prices were incorrect (I made a typo on my spreadsheet which I just caught). The position is now slightly more profitable with the correct prices.
07-Jan-08 - Initial Stock Position - BTO 100 BBT @ 28.03
07-Jan-08 - Initial Call Option - STO 1 Feb08 27.50 Call @ 1.63
01-Feb-08 - DIV 100 Dividend @ 0.46
Summary without the dividend:
Stock Investment: $2,803.00
Income Generated: $163.00
Percent Income Generated: 5.82%
Annualized Income Generated: 54.42%
Net Profit If Called: $110.00
Percent Return If Called: 3.92%
Annualized Return If Called: 36.73%
Days to Expiration: 39 days
Summary with the dividend:
Stock Investment: $2,803.00
Income Generated: $209.00
Percent Income Generated: 7.46%
Annualized Income Generated: 69.78%
Net Profit If Called: $156.00
Percent Return If Called: 5.57%
Annualized Return If Called: 52.09%
Days to Expiration: 39 days
BBT was recommended by Morningstar DividendInvestor. I'm using a dividend capture strategy since BBT goes ex-dividend on 1/9/08 and pays a 0.46/share dividend on 2/1/08. The annual dividend yield at my cost of $28.12 is 6.54% ((0.46*4)/28.12). This is above the 5 year average dividend yield of 3.30%, which is an indication that the stock is undervalued. The dividend information for BBT was obtained from DividendInvestor.com.
TGT - Adjustment
The following adjustment was made today on TGT:
07-Jan-08 - Continued Trade - STO 1 Feb07 55.00 Call @ 0.84 -
Current Position Summary:
Stock Investment: $5,937.00
Breakeven Price: $52.87
Income Generated: $650.00
Percent Income Generated: 10.95%
Annualized Income Generated: 50.58%
Net Profit If Called: $213.00
Percent Return If Called: 3.59%
Annualized Return If Called: 16.58%
Days to Expiration: 79 days
Trade History:
28-Nov-07 - Initial Stock Position - BTO 100 TGT @ 59.37 -
28-Nov-07 - Initial Call Option - STO 1 Dec07 55.00 Call @ 5.66 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb07 55.00 Call @ 0.84 -
07-Jan-08 - Continued Trade - STO 1 Feb07 55.00 Call @ 0.84 -
Current Position Summary:
Stock Investment: $5,937.00
Breakeven Price: $52.87
Income Generated: $650.00
Percent Income Generated: 10.95%
Annualized Income Generated: 50.58%
Net Profit If Called: $213.00
Percent Return If Called: 3.59%
Annualized Return If Called: 16.58%
Days to Expiration: 79 days
Trade History:
28-Nov-07 - Initial Stock Position - BTO 100 TGT @ 59.37 -
28-Nov-07 - Initial Call Option - STO 1 Dec07 55.00 Call @ 5.66 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb07 55.00 Call @ 0.84 -
LM - Adjustment
The following adjustment was made today on LM:
07-Jan-08 - Interim Trade - STO 1 Feb08 80.00 Call @ 0.97 -
Current Position Summary:
Stock Investment: $9,109.00
Breakeven Price: $81.50
Income Generated: $959.00
Percent Income Generated: 10.53%
Annualized Income Generated: 18.93%
Net Profit If Called: -$150.00
Percent Return If Called: -1.65%
Annualized Return If Called: -2.96%
Days to Expiration: 203 days
Trade History:
27-Jul-07 - Initial Stock Position - BTO 100 LM @ 91.09 -
27-Jul-07 - Initial Call Option - STO 1 Aug07 90.00 Call @ 3.49 - Expired
20-Aug-07 - Continued Trade - STO 1 Sep07 90.00 Call @ 2.09 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 90.00 Call @ 0.47 - Expired
15-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.24 -
25-Oct-07 - Continued Trade - STO 1 Dec07 85.00 Call @ 2.09 -
07-Jan-08 - Interim Trade - STO 1 Feb08 80.00 Call @ 0.97 -
07-Jan-08 - Interim Trade - STO 1 Feb08 80.00 Call @ 0.97 -
Current Position Summary:
Stock Investment: $9,109.00
Breakeven Price: $81.50
Income Generated: $959.00
Percent Income Generated: 10.53%
Annualized Income Generated: 18.93%
Net Profit If Called: -$150.00
Percent Return If Called: -1.65%
Annualized Return If Called: -2.96%
Days to Expiration: 203 days
Trade History:
27-Jul-07 - Initial Stock Position - BTO 100 LM @ 91.09 -
27-Jul-07 - Initial Call Option - STO 1 Aug07 90.00 Call @ 3.49 - Expired
20-Aug-07 - Continued Trade - STO 1 Sep07 90.00 Call @ 2.09 - Expired
24-Sep-07 - Continued Trade - STO 1 Oct07 90.00 Call @ 0.47 - Expired
15-Oct-07 - Dividend Received - DIV 100 Dividend @ 0.24 -
25-Oct-07 - Continued Trade - STO 1 Dec07 85.00 Call @ 2.09 -
07-Jan-08 - Interim Trade - STO 1 Feb08 80.00 Call @ 0.97 -
FTEK - Adjustment
The following adjustment was made today on FTEK:
07-Jan-08 - Continued Trade - STO 1 Feb08 25.00 Call @ 0.34 -
Current Position Summary:
Stock Investment: $2,839.00
Breakeven Price: $24.76
Income Generated: $363.00
Percent Income Generated: 12.79%
Annualized Income Generated: 19.36%
Net Profit If Called: $24.00
Percent Return If Called: 0.85%
Annualized Return If Called: 1.28%
Days to Expiration: 241 days
Trade History:
19-Jun-07 - Initial Stock Position - BTO 100 FTEK @ 28.39 -
19-Jun-07 - Initial Call Option - STO 1 Dec07 30.00 Call @ 3.29 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb08 25.00 Call @ 0.34 -
07-Jan-08 - Continued Trade - STO 1 Feb08 25.00 Call @ 0.34 -
Current Position Summary:
Stock Investment: $2,839.00
Breakeven Price: $24.76
Income Generated: $363.00
Percent Income Generated: 12.79%
Annualized Income Generated: 19.36%
Net Profit If Called: $24.00
Percent Return If Called: 0.85%
Annualized Return If Called: 1.28%
Days to Expiration: 241 days
Trade History:
19-Jun-07 - Initial Stock Position - BTO 100 FTEK @ 28.39 -
19-Jun-07 - Initial Call Option - STO 1 Dec07 30.00 Call @ 3.29 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb08 25.00 Call @ 0.34 -
AXP - Adjustment
The following adjustment was made today on AXP:
07-Jan-08 - Continued Trade - STO 1 Feb08 55.00 Call @ 0.69 -
Current Position Summary:
Stock Investment: $5,674.00
Breakeven Price: $52.84
Income Generated: $390.00
Percent Income Generated: 6.87%
Annualized Income Generated: 31.76%
Net Profit If Called: $216.00
Percent Return If Called: 3.81%
Annualized Return If Called: 17.59%
Days to Expiration: 79 days
Trade History:
28-Nov-07 - Initial Stock Position - BTO 100 AXP @ 56.74 -
28-Nov-07 - Initial Call Option - STO 1 Dec07 55.00 Call @ 3.21 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb08 55.00 Call @ 0.69 -
07-Jan-08 - Continued Trade - STO 1 Feb08 55.00 Call @ 0.69 -
Current Position Summary:
Stock Investment: $5,674.00
Breakeven Price: $52.84
Income Generated: $390.00
Percent Income Generated: 6.87%
Annualized Income Generated: 31.76%
Net Profit If Called: $216.00
Percent Return If Called: 3.81%
Annualized Return If Called: 17.59%
Days to Expiration: 79 days
Trade History:
28-Nov-07 - Initial Stock Position - BTO 100 AXP @ 56.74 -
28-Nov-07 - Initial Call Option - STO 1 Dec07 55.00 Call @ 3.21 - Expired
07-Jan-08 - Continued Trade - STO 1 Feb08 55.00 Call @ 0.69 -
Friday, January 4, 2008
Some Changes Coming for 2008
After 3 weeks of a much needed vacation I'm back in the saddle. 2007 wasn't a very good year for my covered call portfolio. My average monthly income dropped from about 2%/month the previous 2 years to below 1%/month. I ended the year below my minimum goal of 12% income for the year but my account value still increased by about 3%, although it was below the benchmark index.
2008 isn't starting out too good either. The market took a beating today and so did my positions. I plan to spend this rainy weekend reviewing my portfolio and planning adjustments to make next week. I've got several positions that are currently uncovered, since I didn't have a chance to do any trading after the Dec options expired.
I plan on making some changes to my trading plan and stock selection criteria in 2008. I just finished reading a great book on value investing that I received as a Christmas gift (Thanks Jeff!). The book is titled Active Value Investing: Making Money in Range-Bound Markets by Vitaliy Katsenelson, and I highly recommend it. Vitaliy makes a good case for the markets to be range-bound for the next several years and describes a process for analyzing companies based on quality, valuation, and growth. He also describes a total return approach, which includes capital appreciation and dividend yield. Although this book doesn't discuss covered calls, I believe that they could enhance the total return by providing a third source of income.
My current stock selection criteria already includes measures for quality, valuation, and growth, and these will be refined further, especially the growth measure which I haven't really paid enough attention to. I also plan on taking a more total return approach, incorporating more dividend paying companies and looking for more capital appreciation (e.g. selling more ATM or OTM calls on dividend paying stocks).
Another book I plan to read is The Ultimate Dividend Playbook: Income, Insight and Independence for Today's Investor by Josh Peters. Josh is the editor of Morningstar DividendInvestor, which I subscribed to last month. I like Josh's approach to dividend investing. His dividend drill is something I'll look to incorporate into my trading plan as well.
I'm also going to investigate using a dividend capture strategy, establishing covered call positions before ex-dividend date to capture both the dividend and the option premium, and possibly some capital appreciation. I may even sell cash secured puts on these CC positions to capture even more option premium and interest on the cash, which would be a fourth and fifth source of income.
I'm also kicking around the idea of limiting the number of positions I hold by allocating a fixed amount of capital to each position, like 4% of total capital. Then putting on an initial position of 1-2% and leaving the rest in the account to collect interest and be available to either sell cash secured puts or average down. Currently I maintain about 10-20% cash reserves, so this change would most likely increase my cash reserves and reduce the amount invested. It may reduce my returns but it would also provide more cash to recover from declining positions. So as always, there's a trade off. Limiting the number of positions would also make it easier to track. I've found that with too many positions I just don't have the time to properly analyze them each month. Having a limited number of high quality positions would be more manageable. I may even spread the expirations out to various months so I don't have so many adjustments to make each month.
Since I started this covered call portfolio I'm moving further and further into the value investing camp. Value investing makes sense to me and there's empirical evidence to support it (e.g. various market studies and actual results from investors like Warren Buffett and several other value fund managers). So, naturally my trading plan will continue to evolve in that direction. I have several ideas I plan to investigate, and possibly implement, this year and will post any changes to my trading plan on this blog.
Hopefully 2008 will be more profitable than 2007 was.
2008 isn't starting out too good either. The market took a beating today and so did my positions. I plan to spend this rainy weekend reviewing my portfolio and planning adjustments to make next week. I've got several positions that are currently uncovered, since I didn't have a chance to do any trading after the Dec options expired.
I plan on making some changes to my trading plan and stock selection criteria in 2008. I just finished reading a great book on value investing that I received as a Christmas gift (Thanks Jeff!). The book is titled Active Value Investing: Making Money in Range-Bound Markets by Vitaliy Katsenelson, and I highly recommend it. Vitaliy makes a good case for the markets to be range-bound for the next several years and describes a process for analyzing companies based on quality, valuation, and growth. He also describes a total return approach, which includes capital appreciation and dividend yield. Although this book doesn't discuss covered calls, I believe that they could enhance the total return by providing a third source of income.
My current stock selection criteria already includes measures for quality, valuation, and growth, and these will be refined further, especially the growth measure which I haven't really paid enough attention to. I also plan on taking a more total return approach, incorporating more dividend paying companies and looking for more capital appreciation (e.g. selling more ATM or OTM calls on dividend paying stocks).
Another book I plan to read is The Ultimate Dividend Playbook: Income, Insight and Independence for Today's Investor by Josh Peters. Josh is the editor of Morningstar DividendInvestor, which I subscribed to last month. I like Josh's approach to dividend investing. His dividend drill is something I'll look to incorporate into my trading plan as well.
I'm also going to investigate using a dividend capture strategy, establishing covered call positions before ex-dividend date to capture both the dividend and the option premium, and possibly some capital appreciation. I may even sell cash secured puts on these CC positions to capture even more option premium and interest on the cash, which would be a fourth and fifth source of income.
I'm also kicking around the idea of limiting the number of positions I hold by allocating a fixed amount of capital to each position, like 4% of total capital. Then putting on an initial position of 1-2% and leaving the rest in the account to collect interest and be available to either sell cash secured puts or average down. Currently I maintain about 10-20% cash reserves, so this change would most likely increase my cash reserves and reduce the amount invested. It may reduce my returns but it would also provide more cash to recover from declining positions. So as always, there's a trade off. Limiting the number of positions would also make it easier to track. I've found that with too many positions I just don't have the time to properly analyze them each month. Having a limited number of high quality positions would be more manageable. I may even spread the expirations out to various months so I don't have so many adjustments to make each month.
Since I started this covered call portfolio I'm moving further and further into the value investing camp. Value investing makes sense to me and there's empirical evidence to support it (e.g. various market studies and actual results from investors like Warren Buffett and several other value fund managers). So, naturally my trading plan will continue to evolve in that direction. I have several ideas I plan to investigate, and possibly implement, this year and will post any changes to my trading plan on this blog.
Hopefully 2008 will be more profitable than 2007 was.
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