Monday, April 20, 2015

Financial Planning: Options Monday - April 20, 2015

As I indicated Friday all but two positions closed in the money and would have been assigned. Shown above are the new equity positions I've taken. As you can see there have been a lot of changes, I hope for the better. There were two un-assigned positions: F and MO. F doesn't expire until April 24 and it's pretty unlikely to be assigned at this point. I purchased another 100 shares of MO, modestly increasing my cost basis by $0.12 per share.

The spreadsheet above shows the calls I wrote, along with the net premium income for each. I'm now including commission cost in my totals. When I started this project I was pretty sure I'd be able to swing a deal for some number of free trades but based on subsequent reading that's looking less likely.

Finally we have my current cash position. The columns are as follows:
  • Income - Cash from Dividends and Premiums
  • Exercise - Cash from assigned positions
  • Repurchase - Cost to re-enter core positions that were assigned
  • New Purchase - Cost of additional stock purchases
  • Distribution - Cash withdrawn as an IRA distribution
So why is April income so much lower? First, there were 5 weeks of time premium in the April options. Second, I was less aggressive in maximizing premium. Third, the mix of underlying stocks has changed considerably, and finally, F still has a weeks to go. Volatility was also lower this time: 13.89 on the 17th versus 16.0 back in March.

What to do about F? I'm willing to be patient with F given that 3.8% dividend. My cost basis is $16.20 and while I'm not unwilling to average down, I'd need to see $15.80 or and even so I'd have to double my position. That would at least bring it into line value-wise with the rest of the portfolio. I expect I'll buy in bits and piece whenever there's a sustained dip under $15.80.
Finally, It's my goal to have about $40,000 available in cash as an "emergency fund" and were I actually retired would be taking a distribution of about $1,800 each month until my full retirement age of 67 when I'll start Social Security. At that point I'll set everything to DRIP and continue to write calls, though probably at a much reduced pace while maintaining roughly equal positions in each underlying.

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