Friday, September 11, 2015

Financial Planning Weekend Update - September 11, 2015

A Friday night update!

It looks we're now in a new, lower trading range and everyone seems to be paralyzed ahead of next week's FOMC meeting and whatever their interest rate decision is. As you can see from the spreadsheet we're a little better off, but really, pretty much in the same place we were last week. My MRK calls were in absolutely no danger of being exercised today and at this point it looks like only F has a chance of being exercised on the 18th.

Next week is busy!

On Monday I'll be looking to write a new batch of calls on my MRK position. Fortunately, MRK has "weeklies" and volatility remains elevated. Given that my cost basis on MRK is $57.45 my current plan is to write one week calls about $1.00 - $1.50 or so out of the money and roll them up and out as necessary. With volatility as high as it is that's something like $180 - $200 income available each week. Of course I'll have to be careful to watch prices each Friday so I can roll out if necessary. MRK just went ex-dividend so I won't have to worry about early exercise (as I did with ED) until December. Speaking of ED...

On Tuesday ED will pay me my first dividend of $325.00. For now, all my positions have dividends set to re-invest (aka DRIP). So Wednesday morning I'll have an additional 5.23 or so shares of ED that will in turn add about $3.40 to each quarterly payment. Then in December I'll get about 5.28 shares and so forth. In about four and a half years that will result in more than 100 more shares which will in turn generate another $260.00 (or more) a year in dividend income and about $100.00 each month in option premium income (Oct. $62.50 calls are currently bid at $1.30!). If everything were to remain the same it looks like this:

It won't, of course, remain the same.  The price of the stock will vary, the dividend will increase over time (it was raised little over 3% last year) and I certainly hope that volatility will settle down (which will lower option premiums). But you get the idea.

Wednesday's fun continues with the two day FOMC  meeting and on Friday my HCP and F calls will expire. F is in the money right now and if it's exercised I'll see a profit of $0.62 a share or about 4.81%. However, if there's an opportunity to do so I'll roll up and out. With only 4 contracts to sell I'll be lucky to bring in $100.00 but anything that generates some income is worthwhile in the current market.

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