MO - Open Position

Written on December 20, 2008 – 10:30 pm | by admin

I opened up a position in MO (Altria Group) this past Thursday (sorry for the late update).  I sold the Jan $14.  I am very concerned with how the market will react once the year changes and so I wanted a rather defensive position to start me off.  It is also yielding an 8% dividend so if I have to hold it for a while, I have some extra income.

Since I sold an ITM option, there is a good chance that I don’t get the dividend.  However, since I am establishing this position in Zecco, my commission costs will only be $10 and getting called before the dividend will yield me $6.  If I were to calculate the annual return for a position that yields .43% every 2 days, it would be over 100% annually.  Not too shabby.

Buy: 100 @ $14.95($0 commission)
Initial Investment: $1495
Sold: $14 strike @ $1.11 ( $5 commission)
Net Investment: $13.89
Dividend: $0.32
Expected Return: 2.73% (0.43% if called before ex-dividend)

Tags: ,

You must be logged in to post a comment.