January 26th, 2012 at 12:49 pm
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.
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 on it just on the Covered Call premiums.
January 25th, 2012 at 11:51 am
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.
January 25th, 2012 at 11:42 am
On Monday, 1/23/12, I bought 100 shares of NVDA at $14.58 to add to and average down my existing 200 shares. I then sold 3 NVDA Jun 12 $18 Covered Calls for a net deposit of $115.72 in an IRA account. My basis for these NVDA shares is now $21.59. This transaction represents a simple return of about 1.75% and an annualized return of about 4.42% on my prior, averaged down basis.
NVDA has been bouncing around the $15 level since basically last October. I could probably have sold a lower strike price but decided to sell the $18 strike and go a little further out.
S&P has a 12-month target of $19 and a Hold recommendation for NVDA. MarketEdge has a price opinion of only $14.22 and a Neutral recommendation. NVDA has had a 52-week high of $26.17 and a low of $11.47, which helped me, decide to pick the $18 strike. The 29 Yahoo Analysts have a 12-month price target of $17.39 with a recommendation of 2.5 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.
One day I will let NVDA be called away from me and be done with it. It does not pay a dividend and I normally do not get sufficient option premiums from it to like it for that reason. For now I continue to hold the stock and sell Covered Calls and am currently a little optimistic that I may actually be able to sell NVDA at a profit one day. Six months ago I was of the opinion that it was dead money and that I should let it be called away sooner at a lower strike price and redeploy the money in a better returning investment.
