I've been busy with the portfolio this week so it's time to announce 2 new moves. First I purchased 50 shares of Lorillard (LO) and then I also sold a put option on Intel (INTC). I think both moves will help out the portfolio through added dividends and/or premium income.
(1) Purchased 50 shares of Lorillard (LO) for $39.96 per share. After commission and fees my per share cost basis on these shares is $40.12. I could have picked the shares up later in the morning for cheaper but I'm fine with the price. The price always seems to go down after you buy and up after you sell, but such is life. Based on the current annual dividend of $2.20 per share my YOC is 5.48% and I'm now set to receive an extra $110 per year in dividends.
I currently have an open put option for 100 shares of LO but I don't think that it'll be exercised and I really wanted to add to a stable dividend payer such as LO. This purchase increased my forward 12-month dividends to $2,177.61 and increased the YOC for my portfolio from 2.99% to 3.06%. I'm now 62.22% of the way towards my forward dividend goal for 2013 and over the 3.00% YOC goal.
(2) Sold a $21 put option on Intel (INTC) for $0.53. After all brokerage costs I received $45.01 in option premium to do with as I please. This put option will expire on April 20th and can go one of three ways.
(a) If Intel is trading above $21 on April 20th, then I will get to keep the full option premium as profit. This would represent a 2.14% return over then length of the option which is annualized to 26.08%.
(b) If Intel is trading below $21 on April 20th, then I will be forced to purchase 100 shares for $21 each. However, since I received the option premium I get to back that out of the cost basis. My cost basis would then be $21 - $0.53 + $7.99 / 100 + $7.95 / 100 = $20.63. Based on the current annual dividend of $0.90, this would be a YOC of 4.36% for these shares.
(c) If Intel makes a large move upwards in price between now and expiration I can close out the position early for a net profit. Unless the move comes pretty quickly I don't think I'll be closing this put out early because the commission will eat up too much of the profit on this trade.
I've been looking for an opportunity to average down my Intel shares and figured that this was a great way to do it. If the shares are put to me, then I'll be able to decrease my total per share cost basis by almost 6% and increase my dividends by another $90. The put will also expire about 2 weeks before the next ex-div date so I will be able to receive the next payout as well. This will take my position in INTC up over 5% of my FI portfolio and I think that's where it'll be staying for a while. I also sold the put on margin which at the time I sold it meant I needed $553.50 to satisfy the margin requirements instead of the $2,100 if I sold it as a cash secured put.
I feel that both the purchase of LO and the put option on INTC will be great additions to the portfolio.
I've updated my Option Summary and Portfolio pages to reflect these changes.