Logical Progress Advancing a Little Bit Every Day


Picking up Ford shares

As noted previously, I had a cash lot left over from the exercise of my MO calls. Rather than plow all the money into new securities I took a gamble and wrote some puts on Ford at $15/share. If the rally had continued through the week I was happy for them to expire worthless, but I'm also equally as happy to get assigned. Well, that's what happened at the close on Friday. Ford closed at $14.79, which was very close to my buy price taking into account the option premium I collected.

Knowing that I was going to get assigned, I went ahead and wrote some $15 calls expiring next Friday. My expectation is that, with the short trading week and ominous uncertainty, they will not close above $15 on Friday. I'm also pretty confident that they won't fall too much by then, allowing me to sell another set of $15 calls expiring the following Friday.

Keep in mind that I'm not raking in massive profits from this strategy, just maintaining income and trying to buy down my total investment in the security. It also helps toward my monthly commission minimums. It looks like this month I've made my $10 minimum, but not yet met my $30 minimum required to waive the cost of my market data subscription, so I'm expecting an $11.50 charge at the end of the month. Fortunately the option premiums I collected more than cover this, so I don't need to rely solely on the dividends to meet this minimum. I want to emphasize that I'm not really all that concerned about these fees, as in previous brokerage accounts my commissions and fees were far greater than this, but just want to highlight how an average investor can use creative methods to ensure these are covered. With a diverse enough portfolio one should be able to make enough trades and collect enough income in order to securely cover these charges.

I'm looking forward to next Friday to see how this plays out. The best case scenario is that it continues to trade close to $15, but not exceed it, allowing me to write more $15 calls. The worst case scenario is that Ford goes to zero (doubt it). The mediocre scenario is that it closes above $15 and I'm left holding just the premium from the calls. However, if this happens, and I can realistically predict an exercise, I will likely again write more $15 puts and see what happens. Ford doesn't go ex-div until around August, so I'm not really interested in holding the stock until then. If I happen to be holding it then, great, but it also will cause me to stop leveraging it, since the dividends may not be considered qualified if I sell it too soon after becoming entitled to the dividend.

Thanks for reading, updates to follow next week.

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