Alcoa (AA) - Position Update

Written on March 10, 2009 – 11:26 am | by admin

Into today’s strength, I took the opportunity to roll my position forward even though it had little to no chance of being called away in 10 days.  I rolled it for 2 reasons.  This market is going up today based on “strong” financial news.  Citigroup said they were profitable for the past 2 quarters excluding items.  If those items happen to be more writedowns, whats the point in being profitable.  Now if the writedowns are included in that profitibilty, then I am wrong and I shouldn’t have done this.  Reason 2 is that I think this rally will have a sell the news type reaction to the mark-to-market hearing on Thursday and also any results from the stress tests.  Since the rolling out kept my annual return at ~42% (If I finally get called at $10), I am okay rolling this now.  Eventually I will need to bite the bullet and roll out/up to the $10 for probably a net debit but I will face that when the situation presents itself.  

Purchased: 200 @ 11.67
Initial Option Income: $1.95
Apr $7.50 Income: $0.37 (after buying back the Mar $7.50)
Other Option Income: $0.56
Dividend Income: $0.17
Expected Return: 12.5% (42.38% annually)
Last Period Expected Return: 9.26% (42.51% annually)
Option periods held: 4

* All return after buy and sell commissions
** Last Period Expected Return is the return I would have gotten if my option was exercised instead of expired. 

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