MMM -- New Position

A new position was established in MMM:

Stock Price	Date	Description	Total	xIRR
$88.65	2012-11-09	Buy 2000 shares MMM @ $88.65	-$177,300.00	21.1%
$91.32	2012-12-07	Sell 20 MMM 1/19 2013 $90 Call @ $3.00	$5,970.05	23.5%

 

V/IWM -- Adjustment

Although I had decided not to trade xxx because I think it's overbought, I decided to simulate trading on it in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$83.03	2012-03-30	Buy 20 IWM 3/30 2012 $82.00 Call @ $1.06	-$2,149.95	36.7%
$83.03	2012-03-30	Sell 20 IWM 4/5 2012 $84.00 Call @ $0.44	$850.05	36.7%

 

V/IWM, V/MMM -- Adjustments

Although I had decided not to trade these because I think they were overbought, I decided to simulate trading on them in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$82.13	2012-03-23	Buy 20 IWM 3/23 2012 $83.00 Call @ $0.03	-$89.95	34.2%
$82.35	2012-03-23	Sell 20 IWM 3/30 2012 $82.00 Call @ $1.05	$2,070.05	34.2%
$88.54	2012-03-23	Buy 20 MMM 3/23 2012 $90.00 Call @ $0.03	-$89.95	12.0%
$88.54	2012-03-23	Sell 20 MMM 4/21 2012 $90.00 Call @ $0.75	$1,470.05	11.7%

 

V/IWM, V/MMM -- Adjustments

Although I had decided not to trade these because I think they were overbought, I decided to simulate trading on them in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$82.85	2012-03-16	Buy 20 IWM 3/17 2012 $81.00 Call @ $1.91	-$3,849.95	36.6%
$82.85	2012-03-16	Sell 20 IWM 3/23 2012 $83.00 Call @ $0.74	$1,450.05	40.3%
Stock Price	Date	Description	Total	xIRR
$89.47	2012-03-16	Buy 20 MMM 3/17 2012 $87.50 Call @ $2.03	-$4,089.95	22.6%
$89.47	2012-03-16	Sell 20 MMM 3/23 2012 $90.00 Call @ $0.37	$710.05	22.6%

 

V/IWM -- Adjustment

Although I had decided not to trade xxx because I think it's overbought, I decided to simulate trading on it in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$81.35	2012-03-09	Buy 20 IWM 3/9 2012 $81.00 Call @ $0.44	-$909.95	24.6%
$81.35	2012-03-09	Sell 20 IWM 3/17 2012 $81.00 Call @ $1.14	$2,250.05	35.2%

 

V/IWM -- Adjustment

Although I had decided not to trade IWM because I think it's overbought, I decided to simulate trading on it in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$82.96	2012-02-03	Buy 2000 shares IWM @ $82.96	-$165,920.00	--
$82.96	2012-02-03	Sell 20 IWM 2/10 2012 $83.00 Call @ $0.92	$1,810.05	81.7%
$81.42	2012-02-10	Suy 20 IWM 2/18 2012 $82.00 Call @ $0.01	-$49.95	-34.3%
$81.42	2012-02-10	Sell 20 IWM 2/18 2012 $82.00 Call @ $0.75	$1,470.05	2.3%
$82.77	2012-02-17	Buy 20 IWM 2/18 2012 $82.00 Call @ $0.83	-$1,689.95	27.3%
$82.77	2012-02-17	Sell 20 IWM 2/24 2012 $82.00 Call @ $1.45	$2,870.05	30.2%
$82.64	2012-02-24	2000 shares IWM assigned @ $82.00	$163,975.00	29.9%
$81.60	2012-02-27	Buy 2000 shares IWM @ $81.60	-$163,200.00	29.9%
$81.60	2012-02-27	Sell 20 IWM 3/2 2012 $82.00 Call @ $0.67	$1,310.05	39.9%
$80.47	2012-03-02	Buy 20 IWM 3/2 2012 $82.00 Call @ $0.02	-$69.95	13.8%
$80.47	2012-03-02	Sell 20 IWM 3/9 2012 $81.00 Call @ $0.79	$1,550.05	23.4%

 

MMM -- Dividend Capture

Last Friday, I saw an opportunity for a dividend capture covered call play on MMM. MMM bounced slightly under the $87.50 strike price and was going ex-dividend on Feb 15. What I expected to happen was to pocket the call premium and a little capital gain on a bounce back up, with the call getting exercised just prior to the ex-dividend date. On the eve of the ex-dividend date, the price was up to $87.99, so everything was going as planned. However, surprise! The call didn't get exercised, so I got to pocket the dividend, plus the stock continued to go up and should get assigned over the weekend.

As a result, I ended up with $2,465 for the week -- $1,180 from the dividends, $790 from the call premium, and $495 from the capital gains. So the dividend almost doubled my return, although the position did last a few days longer as well:

Stock Price	Date	Description	Total	xIRR
$87.24	2012-02-10	Buy 2000 shares MMM @ $87.24	-$174,480.00	19.5%
$87.12	2012-02-10	Sell 20 MMM 2/18 2012 $87.50 Call @ $0.41	$790.05	19.9%
$0.59	2012-02-15	Dividend of $0.59 per share	$1,180.00	--
$87.59	2012-02-17	2000 shares MMM assigned @ $87.50	$174,975.00	21.1%

 

V/IWM -- Adjustment

Although I had decided not to trade IWM because I think it's overbought, I decided to simulate trading on it in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$82.96	2012-02-03	Buy 2000 shares IWM @ $82.96	-$165,920.00	--
$82.96	2012-02-03	Sell 20 IWM 2/10 2012 $83.00 Call @ $0.92	$1,810.05	81.7%
$81.42	2012-02-10	Suy 20 IWM 2/18 2012 $82.00 Call @ $0.01	-$49.95	-34.3%
$81.42	2012-02-10	Sell 20 IWM 2/18 2012 $82.00 Call @ $0.75	$1,470.05	2.3%
$82.77	2012-02-17	Buy 20 IWM 2/18 2012 $82.00 Call @ $0.83	-$1,689.95	27.3%
$82.77	2012-02-17	Sell 20 IWM 2/24 2012 $82.00 Call @ $1.45	$2,870.05	30.2%

 

V/MMM -- Adjustment

Although I had decided not to trade MMM because I think it's overbought, I decided to simulate trading on it in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$87.67	2012-02-03	Buy 2000 shares MMM @ $87.67	-$175,340.00	--
$87.67	2012-02-03	Sell 20 MMM 2/10 2012 $87.50 Call @ $0.77	$1,510.05	41.9%
$87.20	2012-02-10	Buy 20 MMM 2/10 2012 $87.50 Call @ $0.08	-$189.95	12.1%
$87.03	2012-02-10	Sell 20 MMM 3/17 2012 $87.50 Call @ $1.54	$3,050.05	16.4%

 

V/IWM -- Adjustment

Although I had decided not to trade IWM because I think it's overbought, I decided to simulate trading on it in my OptionsXPress virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$82.96	2012-02-03	Buy 2000 shares IWM @ $82.96	-$165,920.00	--
$82.96	2012-02-03	Sell 20 IWM 2/10 2012 $83.00 Call @ $0.92	$1,810.05	81.7%
$81.42	2012-02-10	Suy 20 IWM 2/18 2012 $82.00 Call @ $0.01	-$49.95	-34.3%
$81.42	2012-02-10	Sell 20 IWM 2/18 2012 $82.00 Call @ $0.75	$1,470.05	2.3%

 

V/MMM -- Open position

Although I've decided not to trade MMM because I think it's overbought, I decided to simulate trading on it in my OptionsXPress account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$87.67	2012-02-03	Buy 2000 shares MMM @ $87.67	-$175,340.00	--
$87.67	2012-02-03	Sell 20 MMM 2/10 2012 $87.50 Call @ $0.77	$1,510.05	41.9%

 

V/IWM -- Open Position

Although I've decided not to trade IWM because I think it's overbought, I decided to simulate trading it in my OptionsXPress Virtual account to see what would have happened if I had continued to trade:

Stock Price	Date	Description	Total	xIRR
$82.96	2012-02-03	Buy 2000 shares IWM @ $82.96	-$165,920.00	--
$82.96	2012-02-03	Sell 20 IWM 2/10 2012 $83.00 Call @ $0.92	$1,810.05	81.7%

 

IWM -- Position Closed

Because both the short-term and long-term RSI was high (2d and 14d), I decided to let this position get assigned instead of rolling the call forward:

Stock Price	Date	Description	Total	xIRR
$79.72	2012-01-27	2000 shares IWM assigned @ $78.00	$155,975.00	25.1%

 

MMM -- Position Closed

Because both the short-term and long-term RSI was high (2d and 14d), I decided to let this position get assigned instead of rolling the call forward:

Stock Price	Date	Description	Total	xIRR
$87.46	2012-01-27	2000 shares MMM assigned @ $85.00	$174,875.00	19.9%

 

IWM -- Adjustment

The IWM position was adjusted to the shorter-term call:

Stock Price	Date	Description	OptPrice	Total	xIRR
$78.08	2012-01-20	Buy 20 IWM 3/17 2012 $76.00 Call @ $4.42	$4.42	-$8,869.95	24.5%
$78.01	2012-01-20	Sell 20 IWM 1/27 2012 $78.00 Call @ $0.92	$0.92	$1,810.05	25.1%

I went from a call with $2.34 of extrinsic value to one with $0.91 of extrinsic value, but I fully expect to earn more than the $1.43 difference in the additional seven weeks I now have the ability to write weekly calls on.
 

IWM -- Comment

I'm considering buying back the IWM 3/17 2012 $76.00 Call tomorrow, 2 months early.

I sold it for $3.49, when IWM was $75.95, so all of that was extrinsic value.

Now that IWM is trading at $78.20, the call is selling for $4.44, which means it only has an extrinsic value for $2.24.

So, as I see it:

$0.05	= Captial gain (i.e. stock moving from $75.95 to $76 strike price)
$1.25	= Change in extrinsic price (i.e. earned time decay)
$0.95	= Actual change in call price
-------	--------------------------------------------------------------------
$2.25	= Actual change in stock price

With 8 weeks until the option expires, I think I can earn a lot more time decay selling weeklies than the $2.24 of extrinsic value that remains on the option. For example, next week's $78 call currently has $0.86 of extrinsic value. It also means I earned about $0.18 per day of time decay already, with under $0.04 per day of time decay remaining.

But it also has me wondering -- why such a huge change in extrinsic value over a single week on an option that was 9 weeks away from expiring? Is this a regularly occurring phenomenon that can be taken advantage of? How does one recognize or predict when such a shift might happen?
 

MMM -- Comment

Just a heads up -- last year, MMM went ex-dividend on 2/16, for a $0.55 dividend. If they have the same ex-dividend date this year, that will occur just before the February monthly option expiration.
 

MMM -- New Call

That worked out well. By the time I logged on this morning, MMM was already up about $0.75 from when I bought back my call yesterday:

Stock Price	Date	Description	OptPrice	Total	xIRR
$85.85	2012-01-19	Sell 20 MMM 1/27 2012 $85.00 Call @ $1.99	$1.99	$3,950.05	16.7%

When the call sold, it was the high for the day so far. Extrinsic value on this call was $1.14 for the week, or $0.14 per day. Much better than in the past. Maybe people are getting too optimistic about the near future? I also looked at the $87.50 for next week, which was paying $0.09 per day, and the Feb $85 call, which was paying $0.05 per day.
 

MMM -- Close Out Call

I bought back the outstanding call, with the intention of selling the next weekly or monthly call either tomorrow or on Friday:

Stock Price	Date	Description	Total	xIRR
$81.91	2011-12-23	Sell 20 MMM 1/21 2012 $82.50 Call @ $1.45	$2,870.05	13.3%
$84.99	2012-01-18	Buy 20 MMM 1/21 2012 $82.50 Call @ $2.52	-$5,069.95	14.4%

When I've posted transactions like this before, a common question is why I was willing to accept a loss on the call. I don't see it that way. In the above call transaction, I sold the call for $1.45 of extrinsic value and bought it back when it had $0.03 of extrinsic value. So I've actually collected $1.42 of time decay on the call.

Although the "Total" column looks like a loss, note that I used to have 2000 shares of an $81.91 stock, but now own 2000 shares of an $84.99 stock. The change in intrinsic value on the call was offset by the increase in price on the stock.

Basically, the stock went up $3.08 in price, while the call went up only $1.07 in price. Since I already said I was willing to sell my shares for $83.95 when I sold the original call. any rise above that price is opportunity lost whether I buy back the call or not. In this case, $1.04 (i.e. $84.99 - $83.95). And note that the this $1.04 is the $0.03 extrinsic value I am paying to buy back the call, plus the difference between the stock and call appreciation (i.e. $3.08 - $1.07 = $1.01).

If I had wanted to close out the position, I would have simply let it get exercised at expiration date. So the call buyback is the cost I am willing to spend to be able to continue selling calls on the 2000 shares NOW, versus waiting until Monday to buy 2000 more shares and then sell calls on them. I consider the $0.03 per share to be worth the expense, especially since it should allow me to get more time decay on the next call I'll sell -- presumably earning me more than that $0.03.

 

MMM -- Catchup

This is a catchup post, to document all MMM trades since restarted doing covered calls after the option symbology change:

Stock Price	Date	Description	Total	xIRR
$81.22	2010-07-19	Own 1000 shares MMM @ $81.22	-$81,220.00	--
$85.10	2010-07-23	Sell 10 MMM 8/21 2010 $85 Call @ $2.00	$1,980.05	78.4%
$81.71	2010-08-19	Buy 10 MMM 8/21 2010 $85 Call @ $0.05	-$69.95	32.7%
$0.53	2010-09-13	Dividend of $0.525 per share	$525.00	--
$84.88	2010-09-14	Sell 10 MMM 10/16 2010 $85 Call @ $2.00	$1,980.05	38.1%
$88.90	2010-10-14	Buy 10 MMM 10/16 2010 $85 Call @ $3.90	-$3,919.95	41.5%
$88.90	2010-10-14	Sell 10 MMM 11/20 2010 $90 Call @ $1.85	$1,830.05	35.9%
$86.50	2010-11-11	Buy 10 MMM 11/20 2010 $90 Call @ $0.05	-$69.95	27.3%
$0.53	2010-12-16	Dividend of $0.525 per share	$525.00	--
$85.53	2010-12-14	Sell 10 MMM 01/22 2011 $85 Call @ $2.52	$2,500.05	20.5%
$90.00	2011-04-16	1000 shares MMM assigned @ $90.00	$89,975.00	--
$91.40	2011-04-18	Buy 2000 shares MMM @ $91.40	-$182,800.00	--
$91.46	2011-04-18	Sell 20 MMM 5/21 2011 $92.50 Call @ $1.52	$3,010.05	--
$93.94	2011-05-18	2000 shares MMM assigned @ $92.50	$187,855.00	10.0%
$88.01	2011-07-30	Buy 2000 shares MMM @ $88.01	-$176,020.00	4.5%
$0.55	2011-09-12	Dividend of $0.55 per share	$1,100.00	--
$82.30	2011-11-11	Sell 20 MMM 11/19 2011 $82.50 Call @ $1.04	$2,050.05	2.2%
$80.66	2011-11-18	Buy 20 MMM 11/19 2011 $82.50 Call @ $0.05	-$129.95	1.8%
$80.55	2011-11-30	Sell 20 MMM 12/17 2011 $80.00 Call @ $2.27	$4,510.05	10.7%
$0.55	2011-12-12	Dividend of $0.55 per share	$1,100.00	--
$78.74	2011-12-16	Buy 20 MMM 12/17 2011 $80.00 Call @ $0.05	-$129.95	9.2%
$80.17	2011-12-20	Sell 20 MMM 12/23 2011 $80.00 Call @ $0.85	$1,670.05	12.6%
$81.87	2011-12-23	Buy 20 MMM 12/23 2011 $80.00 Call @ $1.90	-$3,829.95	9.6%
$81.91	2011-12-23	Sell 20 MMM 1/21 2012 $82.50 Call @ $1.45	$2,870.05	13.3%

 

IWM -- Catchup

This is a catchup post, to document all IWM trades since I started using the weekly options for covered calls:

Stock Price	Date	Description	Total	xIRR
$62.03	2010-07-12	Buy 2000 shares IWM @ $62.03	-$124,056.00	--
$61.96	2010-07-12	Sell 20 IWM 7/17 2010 $63 Call @ $0.61	$1,190.05	74.9%
$61.95	2010-07-16	Buy 20 IWM 7/17 2010 $63 Call @ $0.05	-$129.95	66.5%
$62.00	2010-07-16	Sell 20 IWM 7/23 2010 $63 Call @ $0.60	$1,170.05	58.2%
$64.04	2010-07-23	Buy 20 IWM 7/23 2010 $63 Call @ $1.13	-$2,289.95	68.2%
$64.04	2010-07-23	Sell 20 IWM 7/30 2010 $63 Call @ $1.75	$3,470.05	87.5%
$65.35	2010-07-29	Buy 20 IWM 7/30 2010 $63 Call @ $2.48	-$4,989.95	84.2%
$65.24	2010-07-29	Sell 20 IWM 8/6 2010 $66 Call @ $0.75	$1,470.05	79.3%
$64.02	2010-08-06	Buy 20 IWM 8/6 2010 $66 Call @ $0.01	-$49.95	45.0%
$64.31	2010-08-06	Sell 20 IWM 8/13 2010 $65 Call @ $0.70	$1,370.05	53.1%
$62.38	2010-08-11	Buy 20 IWM 8/13 2010 $65 Call @ $0.06	-$149.95	17.3%
$62.42	2010-08-11	Sell 20 IWM 8/13 2010 $63 Call @ $0.43	$830.05	24.6%
$61.24	2010-08-13	Buy 20 IWM 8/13 2010 $63 Call @ $0.05	-$129.95	1.7%
$61.22	2010-08-13	Sell 20 IWM 8/21 2010 $62 Call @ $0.70	$1,370.05	11.1%
$60.57	2010-08-20	Buy 20 IWM 8/21 2010 $62 Call @ $0.03	-$89.95	0.9%
$60.56	2010-08-20	Sell 20 IWM 8/27 2010 $61 Call @ $0.87	$1,710.05	11.6%
$60.57	2010-08-27	Buy 20 IWM 8/27 2010 $61 Call @ $0.05	-$129.95	10.9%
$60.57	2010-08-27	Sell 20 IWM 9/3 2010 $62 Call @ $0.62	$1,210.05	16.2%
$64.33	2010-09-03	2000 shares IWM assigned @ $62.00	$123,975.00	31.9%
$78.69	2010-12-31	Buy 2000 shares IWM @ $78.69	-$157,380.00	--
$78.65	2010-12-31	Sell 20 IWM 1/7 2011 $79 Call @ $0.60	$1,170.05	--
$78.40	2011-01-07	Buy 20 IWM 1/7 2011 $79 Call @ $0.04	-$109.95	--
$78.11	2011-01-07	Sell 20 IWM 1/14 2011 $79 Call @ $0.50	$970.05	--
$80.54	2011-01-14	2000 shares IWM assigned @ $79.00	$158,000.00	--
$80.40	2011-01-18	Buy 3000 shares IWM @ $80.40	-$241,200.00	--
$80.60	2011-01-18	Sell 30 IWM 1/22 2011 $81 Call @ $0.40	$1,160.05	--
$78.53	2011-01-19	Buy 30 IWM 1/22 2011 $81 Call @ $0.04	-$159.95	--
$77.76	2011-01-24	Sell 30 IWM 1/28 2011 $78 Call @ $0.60	$1,760.05	--
$80.66	2011-02-07	Sell 30 IWM 2/11 2011 $81 Call @ $0.80	$2,360.05	--
$82.07	2011-02-11	3000 shares IWM assigned @ $81.00	$242,975.00	--
$82.10	2011-02-15	Buy 2000 shares IWM @ $82.10	-$164,200.00	--
$82.25	2011-02-16	Sell 20 IWM 2/19 2011 $82 Call @ $1.00	$1,970.05	--
$83.35	2011-02-18	2000 shares IWM assigned @ $82.00	$163,975.00	--
$81.60	2011-02-22	Buy 3000 shares IWM @ $81.60	-$244,800.00	--
$81.80	2011-02-22	Sell 30 IWM 2/25 2011 $82 Call @ $0.70	$2,060.05	--
$79.80	2011-02-24	Buy 30 IWM 2/25 2011 $82 Call @ $0.03	-$129.95	--
$81.50	2011-02-25	Sell 30 IWM 3/4 2011 $81 Call @ $1.20	$3,560.05	--
$82.44	2011-03-04	3000 shares IWM assigned @ $81.00	$242,975.00	--
$82.38	2011-03-07	Buy 3000 shares IWM @ $82.38	-$247,140.00	--
$82.10	2011-03-25	Sell 30 IWM 3/25 2011 $82 Call @ $0.75	$2,210.05	--
$82.22	2011-03-25	3000 shares IWM assigned @ $82.00	$245,975.00	--
$82.63	2011-03-29	Buy 2000 shares IWM @ $82.63	-$165,260.00	--
$82.90	2011-03-30	Sell 20 IWM 4/1 2011 $83 Call @ $0.66	$1,290.05	--
--	2011-03-30	Dividend of $0.169 per share	$507.00	--
$84.54	2011-04-01	2000 shares IWM assigned @ $83.00	$165,975.00	47.7%
$84.95	2011-04-08	Buy 2000 shares IWM @ $84.95	-$169,900.00	47.7%
$85.35	2011-04-26	Sell 20 IWM 4/29 2011 $85 Call @ $0.85	$1,670.05	44.0%
$86.39	2011-05-02	2000 shares IWM assigned @ $85.00	$169,975.00	43.3%
$80.41	2011-07-27	Buy 2000 shares IWM @ $80.41	-$160,820.00	40.2%
$74.22	2011-11-11	Sell 20 IWM 11/19 2011 $75.00 Call @ $1.05	$2,070.05	15.3%
$71.86	2011-11-17	Buy 20 IWM 11/19 2011 $75.00 Call @ $0.05	-$129.95	10.7%
$71.90	2011-11-17	Sell 20 IWM 11/25 2011 $73.00 Call @ $1.25	$2,470.05	12.6%
$67.00	2011-11-29	Buy 20 IWM 11/25 2011 $73.00 Call @ $0.02	-$69.95	9.0%
$72.46	2011-11-30	Sell 20 IWM 12/17 2011 $73.00 Call @ $1.91	$3,790.05	16.2%
$72.14	2011-12-16	Buy 20 IWM 12/17 2011 $73.00 Call @ $0.03	-$89.95	15.5%
$73.49	2011-12-20	Sell 20 IWM 12/23 2011 $74.00 Call @ $0.55	$1,070.05	18.5%
$74.54	2011-12-23	Buy 20 IWM 12/23 2011 $74.00 Call @ $0.58	-$1,189.95	18.3%
$74.44	2011-12-23	Sell 20 IWM 12/30 2011 $75.00 Call @ $0.70	$1,370.05	19.9%
--	2011-12-29	Dividend of $0.36 per share	$719.09	--
$74.24	2011-12-30	Buy 20 IWM 12/30 2011 $75.00 Call @ $0.03	-$89.95	19.4%
$75.67	2012-01-03	Sell 20 IWM 1/6 2012 $75.00 Call @ $1.20	$2,366.05	22.7%
$74.80	2012-01-06	Buy 20 IWM 1/6 2012 $75.00 Call @ $0.03	-$89.95	22.3%
$76.20	2012-01-10	Sell 20 IWM 1/13 2012 $75.00 Call @ $1.52	$3,010.05	24.5%
$76.83	2012-01-12	Buy 20 IWM 1/13 2012 $75.00 Call @ $1.88	-$3,789.95	21.5%
$75.95	2012-01-13	Sell 20 IWM 3/17 2012 $76.00 Call @ $3.49	$6,950.05	24.1%