Note: I edited my original post to correct mistakes made and reflect feedback as well as new information.
Yesterday I added $3,000 to my brokerage account. Today, I bought 200 shares of CSX @ $20.90, including commission ($4179.93). My shares will add $112 in annual dividends, which brings my 12-month forward dividends to $3750.34.
I then proceeded to sell my very first option. I would have liked to sell put options, but I lost a long battle with my brokerage firm. I need options trade experience before they will let me sell naked puts. So I sold 2 January '14 call @ 2.15. The commission on the call was $12.45, so I net $429.99 - $12.45 = $417.54.
My buy-write can go one of four ways.
The option expires worthless, and I get to keep 200 shares of CSX at a net cost of $4179.93 - $417.54 = $3,762.39 ($18.81 per share).
My shares get called away, and I receive $4000 minus a commission of $53!
Profit = call strike - net cost of stock - assignment commission = $4000 - $3762.39 - $53 = $184.61
Return before dividends = $184.61 / $3762.39 = 4.9%
Return including dividends = ($184.61 + $120) / $3762.39 = 8.0%
I assume the next 4 dividends will add up to $0.60 - I'm factoring in a dividend increase.
The shares get called before the call expires.
I can buy to close the call.
Does this seem right to you? I'm excited and a little nervous at the same time. I hope my calculations are correct.
Feedback I can learn from would be much appreciated. I'm also wondering how to add the 200 CSX shares to my portfolio. Do I add them at all? Do I add them in at a cost of $18.81? Let me know how you do it.