Comparison of total return.

Review and a comparison.

Lets look at Encana (ECA) and "if" one was to have done a buy and hold with this investment.

On January 17, 2013 I have bought 500 shares of ECA and held it while selling covered calls on this position.  Lets break it down to each of the three segments, Dividends, option, Capital Gains as if it were sold today July 3, 2014 and the option trade at the date that it was called away.

                    Buy and Hold                 Option trading
Dividends:    $ 405.00                            $ 304.80
Options:       $ N/A                                $ 1792.56
Cap. gains   $2740.00                           $ -1050.00
Total            $ 3145.00                         $ 1047.36

Based on the beginning price of $19.10, and today's closing price of $24.58 leave a gain of $5.48 per share. At that time the shares had rallied back up to $20.10 and the price change pattern suggested that it'll pull itself back from that price. Regardless what occurred after the trade doesn't really matter as much as making a decision and sticking with it. In this case the stock price increased further to $26.52 on June 13th and has since pulled back.

I for one am still not impressed with the management changes and the number of assets that they are selling to recapture core business segments. Only time will tell if my views are correct or not but right now the market is giving management the sign of approval.

On a percentage bases compared to the length of time with this investment, 19 months vs 15 months.
for the buy and hold it works out to be (all in) $6.29 per share vs 2.095 or 32.9% vs 11.0%. At first glance it looks bad for the covered call option method. Yet the share price could have declined from March (after it was called away) all this is a reflection about hindsight and paper gains, at the end of the day one cannot predict which way share prices are going. With the markets at all time highs ECA could decline as the over all pulls back or that the weather this summer isn't so hot at everyone is consuming natural gas (NG) to cold their home and office space.

Speaking of Natural gas the price of NG shot up at the end of February to $6.20 per million BTU's from a price of $3.50 range for the year earlier. This price increase was not unexpected and I have commended on it in an earlier posting and the price has settled in the $4.50 range since.

I'll look at the total return of all trades to do a fairer comparison as additional trades have been done within this account during the same time period so it would be prudent to include those trades to see if the overall course is equal to or better then the buy and hold methods.

Till then Happy trading.

SLW, called away early.

Another update for Silver Wheaton (SLW)

My position of 400 shares have been called away at $25 each netting me $9956.00 for this stock. Back into a position of heavy cash.

Lets break down the total return (net)

Bought                                                             $24.11          $  9646.00
May, June, July (options)                                  $  0.88          $    354.00
Sold                                                                 $25.00          $  9956.00

Total Profit                                                                            $    664.00

percentage                                                                             %      6.88

Not bad for a (roughly)10 week holding period. Well at least its better then the 1.257% of just holding the stock and collecting the dividend.

Now onto the next stock to do the option trade on.

Stay tuned while I sort out which company to choose from.

Update Silver Wheaton (SLW) 

Seeing that SLW was on the move upwards yesterday I have bought the June $24 call position for .40 cents each costing me $183. Today I have written the July covered call for $ .55 cents each earning me $197 net. 

Best case is for the shares to be called away at $25, would capture $1.45 each (.90 + .55) or 6.02% for the five week holding period. The worst case would be that it doesn't get called away at $25, as it'll only earn me the .55 (gross) or 2.28%. Still at the low end not a bad return for the 5 weeks.  

Bought at                               $24.10
May covered call                   152.00               0.38
June covered call                   188.00               0.47       
BTC, June  contract             -183.00               0.46 (rnd)        
July covered call                  $197.00               0.49
Total collected                     $354.00               0.885              3.67%

Still not bad over the dividend percentage of 1.257% 

Lets see if SLW has the legs to get up to the $25 dollar mark in the coming 5 weeks. 

Till then happy trading

Silver Wheaton

Its been a fun couple of weeks with Silver Wheaton (SLW), just to recap on May 1st I have bought 400 shares of SLW for $24.10 per share and quickly sold the $25 covered call for .42 cents per share, expiring May 17th. with the last trading day being May 16th.

Those options had expired and today I have written another covered call for the June 21st expire. The only issue is that I decided to go with the $24 contract and not the $25 as the premium was higher for this contract. As such, I have written the call and have gotten filled at $ 0.51.

For this month I've collected $188.00 net and if SLW share price runs up and over the $24 mark it'll be sold causing a loss of $0.10 and share.

Best case is for the shares NOT to be called away at $24, as this would give me the maximum return of 1.95% for the month and IF it gets called away it'll be the worst case, which limits the return to 1.54%.

Bought at                              $24.10
May covered call $152.00        0.38
June covered call $188.00        0.47       
Total collected     $340.00        0.85      3.53%

In either case it still is better then the yearly dividend of 1.257%, based on my purchase price.

Lets see what SLW has in store in the next 4 weeks. Till then happy trading.

Silver Wheaton (SLW) is traded on the New York and Toronto. SLW is a precious metal streaming company. Currently SLW has remained within a trading range between $20 and $30 dollars over the past year. SLW current dividend is 1.257% not very high but still its something. Since I'm looking for a short term holding period I'll take any dividends that come to me during that time.

The one year chart (above) shows that the trading ranges are strong at $24 and $30 with two slightly weaker resistance lines at 25.50 and 28. Currently SLW is trading at the lower end of this range just above the $24 dollar resistance level.

On the 5 year chart we can see two resistance ranges of $22.50 and $30 and two lesser resistance lines at $20 and $40. When comparing the two we can see that the $24 range would be something to watch for as if it breaks below this point the stock price may dip down to test the $20-$21 but, lets hope that we're in and out with a great return.

Today I had purchased 400 shares at $24.10 for a net cost of $9646.00. I quickly sold a call for the May 17th expiry for the $25 contract price and collecting a premium of .42 per share, netting me $152.00. To date I have captured 1.58% regardless if the stock moves above the contract price of $25.

The $152 is really going to be my worst case for this period. For the worst case to occur SLW would remain under $25 per share between now and May 17th.

Best case though is a little better as I bought it at $24.10 and sold it at $25 grossing me 0.90 per share plus 0.38 per share from the premium for a total of $1.28 as a percentage it'll work out to be 5.3% gross for the 16 days.

The TFSA as some cash available if this stock declines. Once again the rules with apply, if the stock declines by 10% I'll look to purchase some additional shares to lower my average. I'll continue to write covered calls, earning me a cash flow that is better then the dividend. If your wondering about the cash flow vs the dividend the current dividend as mentioned earlier is 1.257% per year and on the first option trade I have already collected 1.58% and the contract is only 16 days in duration. If your wondering about annualized rates it works out to be 36.04%

Lets see what Silver Wheaton has in store for us in the coming months.

Till next time Happy Trading






 

Update for Canadian Natural Resources (CNQ)

As of Friday April 17th the 2 - CNQ Apr 42, contracts have been called away and the TFSA has captured the maximum from this trade. Net of fee's it woks out as $511.76 net, as a percentage it is 6.39%. Now I'll need to study the market and see which new stock I'll work on next.

Stay tune and happy trading.

A New Stock. Canadian Natural Resources (CNQ) with Option trade for April.

Since my last post for Encana (ECA) that were called away, I have reviewed my current holdings in the TFSA and determined that Canadian Natural Resources (CNQ) would be the next stock to pick for the TSFA-myoneandonlystockpick to work on. Since the account has been recapitalized from the sale of ECA, I'll be adding to CNQ's current holdings of 50 shares. On Thursday March 20th, I have purchased (at market price) 150 shares of CNQ, the account now holds 200 shares or the qualitative of 2 contracts. Making my cost per share of $40.02, $8004.00. With the current closing price of $41.76 this position is already in the positive by 4.3% 

The two charts shown below highlights where I think where the fair value is for CNQ.  

5 year chart (above), on this chart we can see that CNQ has had a trading range from about $27.50 to $34.00 until it broke out (to the positive) last November. Since the beginning of the breakout CNQ ran up to top out in the $41 range and has since been bouncing between $40 and$42.50. As CNQ is in the upper trading range, it does show that some questions need to be answered. 1) what will happen in the current market place to push it higher?  2) is it more likely that it'll return back to the trading range of $27.50 - 34.00 ? or on a similar note, will the share price pull back and trade in the $34- 40 range again like it did in 2010 - 2011? For me, I'd go with the flow. CNQ is in an up trend and has begun to take a bit of a pause. I'd be looking to divest at this point and look to pick it up again under $34.

1 year chart, on this chart the longer small blue line helps narrow the price ranges to $36 and $34, with $36 being a smaller resistant range. The $34 and under is much stronger with the $32 the strongest level of resistance. Not shown on the above chart is the $30 line as its not a very strong trend line but still represents some resistance. As mentioned above I'd be looking to buy back in in the $34 or less range.

Since the TFSA accounts doesn't allow naked put writing I am required to purchase and sell forward. With my target is now where the current price is, I believe that its a good move away for this position and take it back into a cash position.

On Monday, I have wrote a call option on this position, which was filled at $0.80 for the April 18th expiry date. Collecting $160 for the 4 week position and waiting to see where the market is heading.

Current position $40.02 or $8004
April's call option at $0.80 (gross), $0.74(net)
Earning the TFSA $147.51

Returns based on the best case $2.72 or 6.8%, Return based on the April call option expiring $0.74 or 1.8% for the one month (21% annual) . I'm happy at the moment about the monthly return either way. As before, since there is cash still available in this account I'll be looking to purchase more shares of CNQ if the price declines by 10% below my average price ($36.02), but lets see what the future holds for this stock and the markets in general.

Till the next update Happy Trading.