Profitable Trade: Exxon Mobil (XOM) Covered Call

Today I took profits in XOM in a traditional IRA. The transaction looks like this:

09/30/2011  13:44:08 Bought 100 XOM @ 74.3982                                     -7,449.81 

09/30/2011  13:44:50 Sold 1 XOM Oct 7 2011 75.0 Call @ 1.19                       108.23

10/07/2011  10:15:56 Bought 1 XOM Oct 7 2011 75.0 Call @ 0.05                     -5.02

10/07/2011  10:16:25 Sold 1 XOM Oct 14 2011 75.0 Call @ 0.76                       65.23

10/13/2011  09:59:16 Bought 1 XOM Oct 14 2011 75.0 Call @ 1.62               -172.76

10/13/2011  09:59:48 Sold 1 XOM Nov 19 2011 75.0 Call @ 3.35                    324.23

11/11/2011  15:11:53 Bought 1 XOM Nov 19 2011 75.0 Call @ 4.6                -470.76

11/11/2011  15:12:58 Sold 1 XOM Dec 17 2011 75.0 Call @ 5.45                    534.22

12/09/2011  Dividend                                                                                    +47.00
12/12/2011  BTC 1 XOM Dec 17 @ 4.6                                                           -470.76
12/12/2011  STO 1 XOM Jan 21 2012 @ 5.6                                                   +549.22
12/22/2011  BTC 1 XOM Jan 21 2012 @ 9.35                                                  -945.76
12/22/2011  Sold 100 XOM @ 84.19                                                              +8408.94

We made $452.64 on this transaction in 13 weeks. Our average out of pocket in this trade was ~$7200. This equates to ~6.3% return or 25.14% annual.

With the run up in the price we pretty much drained all the time decay out of this trade. By closing out early we have more powder in the keg for the next downturn.

Trade Continuation: Exxon Mobil (XOM) Covered Call

Today with the DOW down 218 points to 11965 and XOM at ~79.60 I continued the following transaction:

09/30/2011  13:44:08 Bought 100 XOM @ 74.3982                                     -7,449.81 

09/30/2011  13:44:50 Sold 1 XOM Oct 7 2011 75.0 Call @ 1.19                       108.23

10/07/2011  10:15:56 Bought 1 XOM Oct 7 2011 75.0 Call @ 0.05                     -5.02

10/07/2011  10:16:25 Sold 1 XOM Oct 14 2011 75.0 Call @ 0.76                       65.23

10/13/2011  09:59:16 Bought 1 XOM Oct 14 2011 75.0 Call @ 1.62               -172.76

10/13/2011  09:59:48 Sold 1 XOM Nov 19 2011 75.0 Call @ 3.35                    324.23

11/11/2011  15:11:53 Bought 1 XOM Nov 19 2011 75.0 Call @ 4.6                -470.76

11/11/2011  15:12:58 Sold 1 XOM Dec 17 2011 75.0 Call @ 5.45                    534.22

12/09/2011  Dividend                                                                                    +47.00

12/12/2011  BTC 1 XOM Dec 17 @ 4.6                                                           -470.76

12/12/2011  STO 1 XOM Jan 21 2012 @ 5.6                                                   +549.22

We wrung out all the time decay on this one so I rolled the deep in the money call for a net credit of $78.46. This lowers our amount invested to $7010.54 or $70.10/share. We have been able to roll in the money calls on a monthly basis for a nice double dividend. These series of transactions illustrate the enhanced income strategy we have come to know and love.

Trade Continuation: Exxon Mobil (XOM) Covered Call

Today with the DOW up 250 points and XOM at 79.40 I continued the following transaction:

09/30/2011  13:44:08 Bought 100 XOM @ 74.3982                                     -7,449.81 

09/30/2011  13:44:50 Sold 1 XOM Oct 7 2011 75.0 Call @ 1.19                       108.23

10/07/2011  10:15:56 Bought 1 XOM Oct 7 2011 75.0 Call @ 0.05                     -5.02

10/07/2011  10:16:25 Sold 1 XOM Oct 14 2011 75.0 Call @ 0.76                       65.23

10/13/2011  09:59:16 Bought 1 XOM Oct 14 2011 75.0 Call @ 1.62               -172.76

10/13/2011  09:59:48 Sold 1 XOM Nov 19 2011 75.0 Call @ 3.35                    324.23

11/11/2011  15:11:53 Bought 1 XOM Nov 19 2011 75.0 Call @ 4.6                -470.76

11/11/2011  15:12:58 Sold 1 XOM Dec 17 2011 75.0 Call @ 5.45                    534.22

In addition to these amounts we will be receiving a $47 dividend on December 9th. As such our out of pocket investment is down to  $70.89/share. At $70.89 our yield on cost is up to 2.65%. If we get called away on December 17th we will make ~$401 or 5.4% which equates to 25.6% annual. That ain't bad for a deep in the money call written on a rock solid Dividend Champion.

Interesting note: One of the complaints about covered calls is that it limits one's upside. In this instance I would be up $100 more if I hadn't written any calls. I like it better the way I am, however, because I've get less capital invested and, as such, have much more downside protection. In addition, I don't fancy myself a stock picker but I do feel confident in my ability to trade a great stock through the collection of option premium to put myself in situation where I can't lose money. The top three rules of investing? 1) Don't lose money; 2 & 3) See rule number 1. ~ Warren Buffett