The Investment Road to Freedom

February 8th, 2013 at 7:45 pm

F – Sold Covered Call May2013

Today when Ford (F) stock was around $13.11 I sold 1 MAY2013 $14 Covered Call at $0.36 in my taxable account. After commission this brought in $21.01 or $0.21 a share – more than two dividend payments! My basis in this account for Ford is now $13.40. The next dividend payment increases from $0.05 to $0.10 per share.

The history of this trade in my taxable account is as follows

  • 03/05/12 Buy 24 shares at $12.50
  • 06/01/12 Dividend received 24 x $0.05 = $1.20
  • 09/04/12 Dividend received 24 x $0.05 = $1.20
  • 12/03/12 Dividend received 24 x $0.05 = $1.20
  • 01/28/13 Buy 76 shares at $13.77
  • 02/08/13 STO 1 Call MAY2013 $14 at $0.36

The stock has started to rise from the lower bollinger band which is not the ideal time to sell a covered call. However with the S&P 500 ending higher for the 6th straight week, and the uncertainty on how long this can continue I liked the premium for this CC. This transaction brings a ROO (return on option) of 1.60%. My goal is not for my shares to be assigned away come expiration.

I also have a further 100 shares in my IRA account.

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