Friday, March 13, 2009

Update Transaction - AT&T (T)

Due to the extreme upward movement of the AT&T stock, along with its continued high yield, a few transactions were made to increase the possible upside potential of the covered call, namely buying back an April $25 strike call, and selling an April $26 strike call:

Transaction History:
Various Dates Initial Stock Purchase -- Bought 100 T @ 25.125
2/21/2009 -- Additional Stock Purchased -- Bought T @ 23
2/25/2009 -- Initial Calls Sold -- Sold 1 T March $24 Call @ .895
2/27/2009 -- Additional Calls Sold -- Sold 1 T April $20 Call @ 3.95
3/6/2009 -- Bought To Close 1 T March $24 Call @ .3874
3/10/2009 -- Bought To Close 1 T April $20 Call @ 2.93
3/10/2009 -- Sold to Open 1 T April $25 Call @ .34
3/13/2009 -- Bought To Close 1 T April $25 Call @ .84
3/13/2009 -- Sold To Open 1 T April $26 Call @ .39

The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $4,812.50
Cost-Averaged Share Purchase Price: $24.06

After these changes, the downside coverage, and the upside changes, the new values are in bold:

Downside Coverage: 9.26% -> 2.94%
Possible Max Upside: 3.03% -> 6.97% (based on sale of the 100 shares which are still covered)

As can be seen the downside coverage has been extremely reduced, though this is due to the fact that 100 shares are currently not covered. It has been decided that there may still be some more upside left in the stock, before the market turns back around, and so a covered call will most likely be sold in the next week or so on the remaining 100 shares.

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