Tuesday, June 25, 2013

Recent Option Transaction

The markets continued to show weakness since Mr. Bernanke has hinted at slowly ending QE3.  Why the markets are taking this as a bad sign I'm not really sure.  To me that means the economy is on much better footing and it's not like they're going to completely end it right away.  I expect it to be a drawn out process.  Even if they scale back by $20 billion, that's right BILLION!, per month it'd still take over 4 months to wind down.  But as the markets turn south my mouth starts to water as can be seen with my recent purchases of CVX, XOM, PM, KO, and WMT.  The common theme there is quality at reasonable prices.



On Monday, June 24th I closed out the open call option on my ESPP shares, HAL.  I had originally opened the position back on May 14th and received and received $301.26 in option premium after commission and fees.  This would have been a 9.60% annualized return if held through expiration.  I was happy with this move, but since Mr. Market has gone a bit bonkers in June bringing down the share price of HAL, I took advantage to lock in a solid profit on this position.

I bought to close the call option for $1.67 which cost me $175.38 after commission and fees.  The total profit on this trade was $301.26 - $175.38 = $125.88 good for a 2.74% return.  Not bad for around a 1 1/3 month holding period.  This is equivalent to a 24.36% annualized rate.

Earlier this year I devised a strategy to aggressively trade call options on HAL to pick up profits until a new round of shares hit long-term capital gains treatment.  Once that happened I would start letting the first lot get called away and then aggressively trade call options on the new lot.  That's exactly what this trade turned into.  I jumped at the chance to capture over 40% of the premium in just over 16% of the possible open days.

So far in 2013 I've received $1,269.54 in option premium.  This is actually outpacing my dividend income for the year so far, but not to worry, that's still set to be a great year.

I've updated my Option Summary page to reflect this trade.

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