Stocks and Options » Call

Citigroup Inc (C) – Rolled Feb12 Calls Out and Up

Bill — Thu, 02 Feb 2012 23:30:25 +0000

Today, 2/2/12, BTC 1 C Feb12 $32 Covered Call and sold 1 C Apr12 $34 Covered Call for a net deposit of $34.49 in an IRA account. My basis for these C shares is now $32.93, excluding dividends received. This transaction represents a simple return of about 1.03% and an annualized return of about 4.78%, if held to maturity.

At this point, I am glad I did not just sell the 40 shares I owned last month. I may be being a little greedy here but I am happy to need to roll out and up my Calls on C. Rather than take a loss last month I am now in a position where I will actually make a capital gain if my C shares are called away.

S&P continues a 12-month target of $35 for C with a 3 star (Hold) rating. MarketEdge currently has a price opinion of $30.87 and a Long rating, up from $26.31 with a Neutral rating last week. The 22 Yahoo Analysts have a mean 12-month estimate of $40.77, up slightly from last week, and a mean recommendation of 2.3 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

C resumed dividend payouts in May 2011 at one cent per quarter. Prior to that, it last paid a ten cent dividend in January 2009. I am not considering C as a long term core stock but I still stand to make a reasonable profit just on the Covered Call premiums.

Alcoa Inc. (AA) – Rolled out and up Apr12 Calls

Bill — Tue, 31 Jan 2012 21:49:39 +0000

Today, 1/31/12, I BTC 8 AA Apr12 10 Covered Calls and STO 8 AA Jan14 12.00 Covered Calls for a net option premium deposit of $475.87 in an IRA account. My average basis for these AA shares is now 20.44, excluding dividends received. These transactions represent a simple yield of about 2.83% and an annualized yield of about 1.44% with 718 days to expiration.

I find this trade a little humorous because I did almost exactly the same thing one year ago. The only real difference was that I then was rolling up from an Apr11 $16 strike to a Jan12 $17.50. Of course, I rolled out an extra year this time. Then, in Aug11, I actually rolled in and down to the Aug11, $13 strike and was able to sell monthly options through Dec11. Maybe I will be able to do something similar again with these shares.

I made this trade today because AA is ex-dividend tomorrow and I was a little in the money on my prior Covered Calls. I did not to take the chance that somebody would call my shares away because of the recent run up and to capture the dividend, regardless that it is only 3 cents per share. I would probably have been okay but decided to go ahead and get the additional cash deposited today and increase my potential called deposit by an additional $1600.

AA has been moving up of late. The 16 Yahoo Analysts have a mean 12-month price target of $11.40 with a mean recommendation this week (and last week) of 2.5 where 1.0 is a Strong Buy and 5.0 is a Strong Sell. S&P has a12-month price target of $13.00 with a Buy recommendation. MarketEdge has a price opinion of $10.43 with a Long recommendation.

AA is one of those companies that reduced it dividend. Back in February 2009 it paid 17 cents per share and has since reduced that dividend to 3 cents per share, including for the current quarter. I look forward to the day when the dividend begins to recover. In the meantime, I expect that I will continue to hold AA and collect the dividends such as they are and collect option premiums.

Wells Fargo & Company (WFC) – Sold Feb12 Call

Bill — Mon, 30 Jan 2012 17:52:27 +0000

Today, 1/30/12, I sold 10 WFC Feb12 $31 Calls for a net deposit of $60.41 in 5 IRA Accounts and in my Taxable Account. My new basis for these FCX varies from $30.36 to $30.71. These transactions represents simple returns of about .10% to about .27% and annualized returns of about 2.11% to about 5.49% on my potential basis with 18 days to expiration. I will also collect a .12 dividend on these shares as WFC goes ex-dividend in a couple of days on 2/1/12.

I acquired these shares by design by selling last weeks “weekly” Puts at the $31 strike. However, WFC fell more than I anticipated last week making the Feb 3, 2012 weekly WFC $31 calls too cheap to generate a positive cash flow. Even the Feb12 $31 Calls just barely created profits for my single lots. Even so, I sold the Feb12 $31 Calls because my goal with these shares is to be back to cash as quickly as possible with a profit. I rather expect that the Feb12 Calls will expire worthless and I will then be able to sell new calls, hopefully the weeklies.

S&P continues a 12-month price target of $33 with a Buy recommendation. MarketEdge continues a price opinion of $26.07 and has a Long recommendation. The 30 Yahoo Analysts have a 12-month price target of $34.28 and a recommendation of 2.1 on a scale where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Citigroup Inc (C) – Sold Feb12 Calls

Bill — Thu, 26 Jan 2012 19:49:46 +0000

Today, 1/26/12, I bought 60 C at a net cost of $30.78 per share to increase my holdings to 100 shares. I then sold 1 C Feb12 $32 Covered Call for a net deposit of $48.24 in an IRA account. My basis for these C shares is now $33.27, excluding dividends received. This transaction represents a simple return of about 1.43% and an annualized return of about 22.66% on my averaged down prior basis.

I had originally thought that I would sell my 40 C shares when the Covered Calls I had on them expired earlier this month. I was prepared to take a loss and had actually placed a good-till-cancel order for them at $31. I did a little more calculating today and, with C trading up, I decided to buy the additional 60 shares to round out the lot and start selling out of the money Covered Calls. I explored several expiration dates out to Jan14 that would immediately make me in the money. In the end, I decided to sell the Feb12 $32 strike with the thought that I might be able to continue selling Covered Calls for a few months. I know that I will be able roll these Calls out and perhaps up if it appears that I sold too low a strike price.

S&P currently has a 12-month target of $35 for C with a 3 star (Hold) rating. MarketEdge currently has a price opinion of $26.31 with a Neutral rating. The 21 Yahoo Analysts have a mean 12-month estimate of $40.52 and a mean recommendation of 2.3 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Sprint Nextel Corporation (S) – Sold Jan13 Calls

Bill — Wed, 25 Jan 2012 18:51:12 +0000

On Monday, 1/23/12, I sold 8S Jan13$4 Covered Calls for a net deposit of $73.92 in an IRA account. My basis for these S shares is now 9.48. This transaction represents a simple return of about .97% and an annualized return of about .97%, if held to expiration.

Sprint has fallen off a cliff since August 2011 and continues to drift downward. It is up a little today at 2.20 but I have no great expectation for it.

S paid a small dividend (2.5 cents) up until December 2007. It has not paid a dividend since then and I am not sure if or when they will resume. Today I do not consider S part of my core holdings, mostly because it no longer pays a dividend, but I am still content to hold it and collect option premiums to reduce my basis and one day expect to exit S at a profit. If Sprint does resume dividends one day, and before I sell it, I will re-evaluate whether or not to continue holding it. I doubt that I will repurchase it if I no longer hold it at that time.

The 20 Yahoo Analysts currently have a 12-month price target of $3.78 and a 2.7 recommendation where 1.0 is a Strong Buy and 5.0 is a Strong Sale. So, I guess the consensus is slightly toward a sell.