Profitable Trade: Altria Group (MO) Covered Call....Again

Back to back I closed two Altria Group trades I had going in two different accounts. This one is in  a traditional IRA. The DOW was up huge...over 360. This follows my trend of closing out transactions on big up days and opening income transactions on big down days. The investment went as follows:

09/01/2011  10:28:40 Bought 200 MO @ 27.2695                                        -5,463.89

09/01/2011  10:30:16 Sold 2 MO Oct 22 2011 27.0 Call @ 0.8                          148.50

10/11/2011  03:58:13 QUALIFIED DIVIDEND (MO)                                            82.00

10/18/2011  13:42:00 Bought 2 MO Oct 22 2011 27.0 Call @ 0.67                  -145.52

10/18/2011  13:42:54 Sold 2 MO Nov 19 2011 27.0 Call @ 1.05                        198.47

11/11/2011  15:39:19 Bought 2 MO Nov 19 2011 27.0 Call @ 0.87                  -185.53 

11/11/2011  15:40:38 Sold 2 MO Jan 21 2012 27.0 Call @ 1.28                        244.47

11/30/2011   BTC 2 MO Jan 21 27 Calls @ 1.67                                              -345.53

11/30/2011   Sold 200 MO @ 28.47                                                              +5684.26

In this trade we made $217.23 in 3 months. This equates to ~4.1% return or 16.3% annual. This is another bread and butter enhanced income transaction on a great dividend company. In addition, by closing these transactions we increase our cash position to use when sentiment flip flops back toward fear.

Profitable Trade: Altria Group (MO) Covered Call

1. 9/6/11  Bought 200 MO @ 26.57                                               -5323.63
2. 9/6/11  STO 2 MO Oct 22 27's @ .54                                            +96.50
3. 10/11   Dividend                                                                           +82.00
4. 10/21  BTC 2 MO Oct 22 27's @.50                                             -111.52
5. 10/21  STO 2 MO Nov 19 27's @.95                                           +178.47
6. 11/17  BTC 2 MO Nov 19 27's @.72                                            -155.52
7. 11/17  STO 2 MO Jan 21 27's @1.15                                           +218.47
8. 11/30  BTC 2 MO Jan 21 27's @1.64                                           -339.56
9. 11/30 Sold 200 MO @ 28.41                                                      +5672.26

Today with the market in the throes of irrational exuberance..ha..I closed out this position in a taxable account. It was basically dead money at this point. We made $318.70 in ~11 weeks which is a profit of 6.1% which equates to ~28.8% annually. Not bad for a widow and orphan, blue chip, high and rising dividend stock. This is a bread and butter enhanced income, double dividend transaction.

Trade Continuation: Altria Group (MO) Covered Call

Today in a taxable account with MO at 27.65 and the DOW down 16 I continued the following transaction:

1. 9/6/11  Bought 200 MO @ 26.57                                               -5323.63
2. 9/6/11  STO 2 MO Oct 22 27's @ .54                                            +96.50
3. 10/11   Dividend                                                                           +82.00
4. 10/21  BTC 2 MO Oct 22 27's @.50                                             -111.52
5. 10/21  STO 2 MO Nov 19 27's @.95                                           +178.47
6. 11/17  BTC 2 MO Nov 19 27's @.72                                            -155.52
7. 11/17  STO 2 MO Jan 21 27's @1.15                                           +218.47

With these transactions I have the amount invested down to $5015.23 or $25.07/share. Altria goes ex-dividend December 23rd. If we don't get called out we will receive an additional $82 and we will lower our amount invested to $4933.23 or $24.66/share.  I'm happy if we do get called out as that will make $364 in  15 weeks or ~6.9% which equates to ~23.9% annually. That's a nice return for such a conservative investment. I'm just as happy not getting called out, collecting the dividend and writing new calls sometime in the future.

Altria Group is a great stock for enhanced income, double dividend investment strategies. I would wait to enter a new position, however, until the stock is in the bottom one quarter to one third of it's trading cycle.

Trade Continuation: Altria Group (MO) Covered Call

In a Roth IRA with the DOW up 230 and MO at 27.80 I continued this investment as follows:

09/01/2011  10:28:40 Bought 200 MO @ 27.2695                                        -5,463.89

09/01/2011  10:30:16 Sold 2 MO Oct 22 2011 27.0 Call @ 0.8                          148.50

10/11/2011  03:58:13 QUALIFIED DIVIDEND (MO)                                            82.00

10/18/2011  13:42:00 Bought 2 MO Oct 22 2011 27.0 Call @ 0.67                  -145.52

10/18/2011  13:42:54 Sold 2 MO Nov 19 2011 27.0 Call @ 1.05                        198.47

11/11/2011  15:39:19 Bought 2 MO Nov 19 2011 27.0 Call @ 0.87                  -185.53 

11/11/2011  15:40:38 Sold 2 MO Jan 21 2012 27.0 Call @ 1.28                        244.47

Our cost basis/downside protection is $25.60/share. In addition we are set up to collect another $82 dividend which will lower our amount invested to $25.21. If we get assigned it will probably happen the 3rd week of December so the option buyer can collect the dividend. The called return will earn ~$260 or 4.8% which equates to ~22.69% annually. If the shares drop below 27 we will collect another $82 dividend and we'll write a fresh call. Our yield on cost is 6.4%. The assigned return on this high yield Dividend Champion is yummy especially on such a conservative in the money investment.

New Trade: Altria (MO) Covered Call

With the market down big today I added to my MO position in my retirement account. I bought the stock at 27.30 and sold the Dec 17 2011 27 call for .82. My cost basis taking into account the new short call, my prior purchase, reinvestment of dividends and commissions is $25.28.

Due to economic uncertainty, heavy global debt load and my belief that we are in a secular bear market I have once again chosen to write my call in the money.