Wednesday, December 15, 2010


For some reason, this time of year brings a multitude of dividend payments in the DITM accounts, ho ho ho...

After the Holidays I shall "mark to market" the year 2010 - that means on paper close out all positions, buying calls and selling stock at current prices, just to evaluate and exhibit the results.

I'm pleased to report on one position - Exelon Corp., a utility - which I've held for 16 months. This displays what I have believed to be a critical part of DITM - the safety net. On August 7, 2009 I bought 100 shares at $49.87/share. It currently trades at $41, so if I'd just bought the shares I'd be out $900.

During that time I took in $5425 in call premium, dividends, and the sale at $41, if it is called away before the next Feb. ex-D date. So in 18 months I will have received 13.1% - annualized at 8.75%. If it is not called away on an ex-D play, the call will expire in April's expiry date: 20 months with the extra dividend makes the total $709 profit on $4996 initial investment, or 8.5% annualized -not bad for a stock that dropped nearly 20% in price.

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