Well the markets were on a tear to start the week off and it allowed me to capitalize on some opportunities. I was expecting for July to be kind of slow for my portfolio since my capital will be a bit lower since my wife and I are starting to look at buying houses and possibly purchase later this year. On Monday I was able to close out my put option on Lorillard (LO) and while I didn't really want to close it out because I felt I was leaving some profit on the table; I also felt that I was a bit over-leveraged after all of my purchases in June left me with less capital to cover potential option executions. Especially with my Clorox (CLX) put in the money. Of course now it's not so I probably didn't need to close the Lorillard put.
As the title suggests I have an option transaction and a sale to announce. Let's start with the option transaction.
I bought to close the $80 put that I had sold on Caterpillar (CAT) in mid-June. Caterpillar shares made gained almost 2% on Tuesday so this lower the price of the put option. I was able to close the position by buying to close the contract for $2.73. After commission and fees this cost me a total of $281.73 and netted me a profit of $124.53. My total percent profit on this trade was $124.53 / $8,000 = 1.56%. Not bad for just under one month plus it's equivalent to a 21.06% annualized return.
I had sold this put on margin, so my cash on cash return was really much higher since my margin requirements averaged around $2,300 for this put instead of the $8,000 if it was sold as cash secured. This bumps the return up to 5.41% in just under one month. I don't keep track of my returns based on margin requirements but a 5.41% return in less than a month is pretty amazing.
I also made a sale on Tuesday, but it wasn't a core holding of my dividend growth strategy. I sold some of my ESPP shares in Halliburton (HAL). If you look at my portfolio I'm way over-allocated to my employer through my ownership stake as well as them providing all of my income. So it was good to be able to sell off some of the shares and capture a nice gain.
I sold 67 shares of HAL for $44.56 each. After commission I received $2,977.51 which is a profit of $1,012.13 from my cost basis of $1,965.38. That's a cool 51.50% profit since December 30, 2011. Since these were shares purchased through the ESPP program the taxes become more complicated. I'll work on a post describing the tax situation that comes from selling ESPP shares.
I have 3 open call options on HAL and all 3 are currently in the money. Two of them expire later this month and the other doesn't expire until October. If the call options on HAL are executed, as they should be, I'll be setting that capital aside to use for a down-payment instead of reinvesting back into my portfolio. It's a shame but comes with the territory of wanting to own a house. If they aren't executed then I'll be looking for a chance to sell them anyways.
I was a bit over-leveraged before closing out the Caterpillar and Lorillard puts but have since cleaned that up quite a bit. I feel much more comfortable with my situation now and it's even better that I was able to lock in some nice gains. It's hard to tell where the Clorox put option will go from here since it's currently trading just pennies under the strike price. I'd really like for the share price to hang around the current level just below the strike price so I can add another solid dividend growth company to my portfolio on the cheap.
My total profit from option premiums in 2013 is now up to $1,485.35.
I've updated my Option Summary and Portfolio pages to reflect these changes.