This position was another in my ex-dividend strategy, which involves creating an ITM covered call position in a company which has an ex-dividend date prior to the expiration date of the option. As planned, the position was called away the last trading day before its ex-dividend date. The final profit/loss info is below:
10/20/2009 -- Bought 100 MCHP @ 26.14
10/20/2009 -- Sold To Open 1 MCHP November $25 Call @ 1.54
11/13/2009 -- Sold 100 MCHP @ 24.9543
The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Cost Basis: 2460.00
Final Profit: 1.44%
Potential Annualized Gain If Called At Ex-Div Date: 21.90%
Wednesday, November 18, 2009
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First time to your blog but find the idea of establishing a deep ITM CC prior to ex-dividend day interesting. Why did you not get the full $25.00 on the expiration of the 25 call? ALso can you give details on how you select this type of play?
ReplyDeleteTom,
ReplyDeleteThanks for visiting the blog, I hope you found it interesting. As for the first question, the reason I did not receive a full $25 on expiration was because I have to pay an option assignment fee through my broker which is about $5. As far as the second question goes, I start by looking through a website called dividend.com which lists ex-dividend dates for stocks. If you use their ex-dividend date search functionality, it lists by day, which stocks have an ex-dividend date. I record all of these stocks which have an ex-dividend date between the current expiration and the next expiration. Then its a matter of choosing which of these stocks to use the ex-dividend strategy. Rather than explain that process in this comment, I will work on a post this weekend explaining the full process.
Feel free to keep commenting, its makes it more interesting for all readers.
Thanks,
Jake
You didn't show any adjustment to the cost basis for commissions so I didn't expect you to do it for the closing transaction. Thought something else may have been going on that I didn't understand.
ReplyDeleteTom
Jake,
ReplyDeleteDid you ever post a review of your ex-dividend strategy?
Jerry