The Money Tree

Safely Generating Income in Retirement

Archive for April 22nd, 2012

Update – EXC

Posted by mounddweller on April 22, 2012

Fellow Traders,

I wanted to give you an update on my position in EXC.   My last update was about 4 months ago.  You can read it here:  I initiated a long-term position in EXC back in April of 2010.  My objective in this position is to over time accumulate enough shares such that the quarterly dividends will provide a portion of the income I need in retirement.

Since I initiated the position I have periodically sold covered calls and naked puts to generate income off the position and to accumulate additional shares when EXC falls to a favorable price.  Initially I was taking the dividends in cash but recently I’ve began to reinvest them in additional shares.  This should allow me to acquire a substantial number of additional shares over the next 10 years.  Currently, I own 507 shares.

Last month I sold 3 APR $38 puts for $0.45.  EXC for the first time in quite a while fell below $38.  Thus, I chose to roll my puts out into MAY.  I did this by buying to close (BTC) the APR puts for $0.30 and selling to open (STO) the MAY puts for $0.85.  This resulted in a net credit of $153.43 further reducing my average cost in EXC to $35.65.

To date I have had my position in EXC for just over two years.   During that time my total cash returns have been $2,691.28 (net of commisions). This gives me a ROIC of 28.31%.  Annualized this comes out to 14.06%.

I hope to be able to replicate this strategy with other blue-chip, high dividend companies once they come into my buying range.  Other companies I’d like to implement this strategy with include AT&T (T), Intel (INTC), and Wal-Mart (WMT).



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