Adding $ to a CVX long position

[netwrangler]

I'm planning to post to this thread every time I make a trading decision.
Since the history of the CVX position starts last July, there will be some catching up to do.

Here is some background that I believe is pertinent.

I am a retiree managing my retirement nest-egg. That means I did not take a monthly retirement income. I chose to take my retirement as a lump-sum. Given the CAP rates then versus now, that was a good decision.
Also, it was a decision that gave me a lot of things to do.

One thing that is obvious to me since I have been a member of the OTF is that my investment goals may differ from yours.
All you young investors are "seeking to make your fortune."

Well, I have made mine, such as it is. My goal is to keep from losing it.
I wish my fortune were more. I would love to be able to toss my assets over to some portfolio manager and tell them, "Just make sure I can pay off the AMEX card."
Unfortunately, I don't have that much money.

So I am managing this myself and here are my goals:

Be able to draw 0.5% per month from my investment portfolio as current income;
Beyond the draw, add to the principle sufficiently to cover inflation;
Use 'windfalls' above this level of return to finance our retirement 'wish list' — e.g. "let's go to Japan for three weeks."
So, I'll post some investment/trading decisions for CVX and related options. When push comes to shove, the pertinent questions are:

Did I meet the 6% income requirement?
Did I cover inflation?
Will I be taking my wife to Japan?
My feelings about Japan: I hope we go!

[netwrangler]

On July 26, 2007,
I bought 500 shares of CVX @ 89.43 got a cost of $44,725.95.
For those of you keeping score, this is a big position for me.

On 7/23/2007, I had had my shares of CVX assigned when call options I sold were exercised. The 500 share buy thus opened a new position.

This is what the CVX daily chart looked like at the time.

2399

I was concerned that I was buying back in at the top of a swing.
So I:

Sold 5 AUG90 calls @ 2.15
but I also bought 10 AUG85 puts @ 1.05
later in the day I sold the 10 AUG85 puts @ 2.10

Option trading net for the day was: $2086.29 [net of fees]

[netwrangler]

The AUG85 calls had expired out of the money.
The CVX chart looked like this:

2400

I sold:

5 SEP85 calls @ 1.10
I gained income by waiting until the CVX price recovered.

Option trading
net for the day: $536.29
net for the position: $266.58

[netwrangler]

Actually, I sold
5 SEP90 calls @ 1.10
Sorry for the typo.
The rest of the figures are correct.

[netwrangler]

The PPS came close my September strike price on a date close to expiry for my SEP90 calls.
This is the chart I was looking at:

2402

To avoid assignment, I did a rollout:
Bought 5 SEP90 calls @ 1.486
Sold 5 OCT90 calls @ 3.294
Net option gain/loss
for the day: $876.56
for the position: $3419.14

The incremental options income was worth about 1% for the month, or a 12% annual return.
That return is worth a rollout to me.

[netwrangler]

On 9/26 I was looking at the following chart:

2403

With a short position in OCT90 calls and a recent high, on 9/24, of $95.50, I took advantage of a dip to rollout my call position:
Bought 5 OCT90 @ $4.68
Sold 5 NOV95 @ $2.81
Turns out I could have waited on this trade and done better, but who knew?

Actually, the missed trade was on 9/13.
If I had seen the direction of the CVX price and done the rollout on 9/13, I would have been dollars ahead.
option trade gain/loss:
on this trade: (952.48 )
on this position: 2546.66
Easy to see with 20/20 hindsight

[netwrangler]

The CVX PPS declined to a low of $87.10 on 11/2.
This decline sent an alert to me labeled "But Back The Calls"
11/2
bought back 5 NOV95 @ $0.15
11/5
sold 5 DEC95 calls @ $1.05
The chart showed CVX in decline

2404

so with the call money (plus a little more)
11/5
bought 5 DEC80 puts @ $1.05
and that play was rewarded
11/12
sold 5 DEC80 puts @ $1.80

Option gain/loss
for 11/2-11/12 transactions: $670.17
for the position: $3216.83

[netwrangler]

On 12/21 the CVX price was rising, and coming close to the strike price of 95. Rather than take the chance of assignment, I did a rollout on my calls.
bought 5 DEC95 @ $0.08
sold 5 JAN100 @ $0.47
This gave me option gain/loss
for 11/12: $177.54
for the position: $3394.37

[netwrangler]

The year has one more trading day to go.
If it were to end right now, here is how this position works out:
Investment: $44,724.95

Options income: $3394.37
Dividend income: $580.00
Total Realized gain: $3974.37

Unrealized gain
based to last after hours price of $94.86: $2715

Percentage gains:
Realized
raw = 8.89%
api = 21.33%
Unrealized
raw = 6.07%
api = 14.57%
Total
raw = 14.96%
api = 35.9%

Clearly this is a successful position. It easily exceeds my investment objectives of realized gains >6% and unrealized gains > the inflation rate.

Nursing a position like this across months doesn't have the excitement of Luc1Grunt scalping AAPL or aiki14 squeezing short dollars out of RIGL.
Instead it's kinda like watching grass grow.

Nevertheless, it is a good example of how to use options to improve your yield from a long-term position. 8)

[TonyM]

I like it, good example of using a solid company in a sector that is still hot despite being labeled as out of gas by some talking heads more than once over the last year.

[aiki14]

Ditto to Tony's post. Great Job Bass man. I have traded options around my long cvx position for a couple years now with pretty good success. I wish you success on your Japan goal, let me know when you're ready to pull that trigger and I'll give you some recommendations for things to see.