This morning I opened the first of my Rollover IRA positions with a Buy/Write of Consolidated Edison (ED) against September 18 $65 Calls (ED 09/18/2015 65.00 C). This results in a conservative entry price of $64.25 ahead of the September 16-17 FOMC meeting. Nearly everyone expects that meeting to be the first interest rate increase in years, likely 0.25%. Although the talking heads seem to believe that this rate increase is "baked in" I believe that rate sensitive stocks (like ED) are likely to take a small hit. As a result I'm hopeful I won't need to roll out on the 18th.
So what's my potential in this position?
|Commissions $12.70 each way, dividend payable 9/15|
Now, the September dividend's ex date is Monday 8/17. Ex dates are 2 days before the record date, so there's a possibility I'll get hit with an early exercise on Friday 8/14. If that happens, I'll take the 1.16% profit in 4 days and open another position. It'll be a bummer to miss the dividend, but that's just one of the factors you need to be aware of when writing covered calls.
ED is intended to be a permanent member of my IRA portfolio. The equity leg of the trade is set to reinvest dividends and will remain so until I need the dividends for income.