Trade: SVU and SVU IC covered call

September 5th, 2009 · No Comments

As mentioned earlier, right after August expiration I began looking for new covered call opportunities.  As mentioned earlier in this blog, one of my strategies is to look at the Dividend Aristocrats list for companies who will likely be paying dividends prior to next month’s option expiration, so that’s what I did.

Between last month and this month, I’ve written a little Python application that downloads quotes, plus dividend information, from Yahoo Finance.  Using that as an initial screen to find companies that last paid dividends 3 months ago, plus whose current price fits within the range of my portfolio’s ability to buy at least 100 shares, I went off and did more research on the companies that came up.   In the end, I decided to make a covered call trade with Supervalue (SVU) and the Sept $15 call.

I should also mention that I did consider continuing on with calls for Aflac (AFL) and Home Depot (HD).  But I just felt AFL was too risky given the rather large run-up it has just gone through which I can’t quite explain.  And if I can’t explain why it went up, I certainly can’t forecast when it might go down.  Best to just stay away.  For HD, the premium for selling calls was just too low and I felt I’d have a better guaranteed income somewhere else, thus why I went back to the dividend aristocrats list.

Here is my analysis.  As usual, I’ve included my comissions in the numbers, which is why some values go to fractions of a cent.

Critical Dates:
2009.08.26: Initial position: BTO 200 SVU @ $14.76475
2009.08.26: Initial call option: STO 2 SVU IC (Sep09 $15) @ $0.2375
2009.08.28: Ex-dividend date: DIV 200 @ $0.1725
Summary, if NOT called (static return):
Days position held: 24
Capital investment: $2952.95
Income received: $82.24
Percent return: 2.79%
Annualized yield: 51.86%

Summary, if CALLED at expiration:
Days position held: 24
Capital investment: $2952.95
Net profit if called: $124.34
Percent return if called: 4.21%
Annualized yield if called: 87.25%

Tags: Options · Trades

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