Options Trade Update

      I recently wrote about a purchase I have made in Canadian National Railway. Since my purchase, the stock price fell by almost $6.00 a share before starting finding some positive momentum.  I wanted to take advantage of this decline in share price, but I had to do something different than an actual purchase due to lack of capital in the TFSA account. So I bought 2 call option contracts, which is Option Trade #2 in the link, of Canadian National Railway (CNR) with a $74.00 strike price and June 19, 2015 expiration date.  The premium I paid was $1.90 per contract and total cost being $391.95 including commissions.

     On May 15, 2015, I sold to close at $2.15 per contract. The option price was showing some momentum with the stock price showing some upward price movement.  I decided to close the option and take the small profits.

Summary:

Initial Investment:  # of contracts  *100 * premium + commission
                              = 2*100*$1.90 + $11.95
                              = $391.95

Proceeds of Sale = 2 *100*2.15 - $11.95
                            = $418.05
                          
Profit = $418.05-$391.95
          = $26.10

Total Return = $26.10/$391.95
                     = 6.659%

   This is a small profit, but I will take a small profit over a loss any day.  This trade is inside my TFSA so these profits will be tax-free.

      I still own my 25 shares of CNR ( Toronto Stock Exchange) in my TFSA.  The railways have excellent competitive advantages in the marketplace especially the barrier to entry. It would be near impossible to start a railway from scratch that would cover a large section of Canada or the United States. It is advantageous from a cost and environmental stand point to transport goods over large distances by rail instead of 100% by a tractor trailer.

Do you like the railways?

Disclosure: Long CNR

Photo Credit : www.railpictures.ca

DISCLAIMER:
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.