Wednesday, December 17, 2014

Early Assignment of Covered Calls Position in iShares MSCI South Korea Capped ETF

Today prior to market open, my broker informed me that the 3 Dec2014 call options in iShares MSCI South Korea Capped ETF were assigned, so the 300 shares of EWY were sold at the $55.00 strike price.  The owner of these calls exercised their option yesterday to obtain the 300 shares on the day prior to today's ex-dividend date for EWY to capture the $.67 distribution.  As detailed below, this investment yielded a modest +0.3% absolute return in 54 days (which is equivalent to a +2.2% annualized return-on-investment).


1. iShares MSCI South Korea Capped ETF -- Closed
10/24/2014  Bought 300 shares EWY at $56.68
10/24/2014  Sold 3 EWY Dec2014 $55.00 Call options at $1.93
12/17/2014  Early Assignment -- Sold 300 shares EWY at $55.00 strike price

The performance result (including commissions) for this South Korea ETF position was as follows:
Stock Purchase Cost: $16,995.05
= ($56.68*300+$8.95 commission)

Net Profit:
(a) Options Income: +$567.80
= 300 * $1.93 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (HAL sold at $49.90) = -$512.95
= ($55.00-$56.68)*300 - $8.95 commissions

Total Net Profit: +$54.85
= (+$567.80 +$0.00 -$512.95)

Absolute Return: +0.3%
= +$54.85/$16,995.05
Annualized Return: +2.2%
= (+$54.85/$16,995.05)*(365/54 days)

Tuesday, December 16, 2014

Established a 100% Cash-Secured Puts Position in Alibaba Group ADR

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Alibaba Group ADR (Ticker Symbol BABA) with a Jan2015 expiration and at the $100.00 strike price.  As detailed below, this investment will provide a +2.5% absolute return in 33 days (which is equivalent to a +28.2% annualized return) if Alibaba closes at or above $100.00 at options expiration on January 16th.

Details of this transaction along with a potential return-on-investment result are: 

Alibaba Group  (Ticker BABA)
The transaction is as follows:
12/16/2014 Sold 2 out-of-the-money Jan2015 $100.00 Put options @ $2.60
Note: The price of Alibaba stock was $105.51 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the two Put options sold.

A possible overall performance result (including commissions) for this Alibaba transaction would be as follows:
100% Cash-Secured Cost Basis: $20,000.00 = $100.00*200
Note:  the price of Alibaba was $105.51 when the Put options were sold.

Net Profit:
(a) Options Income: +$509.55
= ($2.60*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Alibaba closes above $100.00 at the Jan2015 options expiration): +$0.00
= ($100.00-$100.00)*200 shares

Total Net Profit (If Alibaba is above $100.00 strike price at Jan2015 options expiration): +$509.55 
= (+$509.55 +$0.00 +$0.00)

Absolute Return (If Alibaba is above $100.00 at Jan2015 options expiration and Put options thus expire worthless): +2.5%
= +$509.55/$20,000.00
Annualized Return (If Alibaba is above $100.00 at expiration): +28.2%
= (+$509.55/$20,000.00)*(365/33 days)

The downside 'breakeven price' at expiration is at $97.40 ($100.00 - $2.60), which is 7.7% below the current market price of $105.51.
The 'crossover price' at expiration is $108.11 ($105.51 + $2.60).  This is the price above which it would have been more profitable to simply buy-and-hold Alibaba stock until January 16th (the Jan2015 options expiration date) rather than holding this short Puts option position.

Friday, December 12, 2014

Established Covered Calls Position -- Halliburton Co.


Today, a new covered calls position was established in Halliburton Co.  (Ticker Symbol HAL).  This Halliburton position was established at the $40.00 strike price and with a Jan2015 options expiration.  As shown below, this investment will provide a +3.2% absolute return in 37 days (which is equivalent to a +31.6% annualized return) if Halliburton stock closes at its current price of $37.59 at options expiration on Jan 16th.
The details of the associated transactions and two potential return-on-investment results are as follows:

1. Halliburton Co. (HAL)
The transactions were as follows:
12/12/2014 Bought 300 HAL shares @ $37.59
12/12/2014 Sold 3 HAL Jan2015 $40.00 Call Options @ $1.30
Note: the price of HAL was $37.59 today when these options were sold.

A possible overall performance result (including commissions) for these Halliburton covered calls is as follows:
Stock Purchase Cost: $11,285.95
= ($37.59*300+$8.95 commission)

Net Profit:
(a) Options Income: +$378.80
= 300*$1.30 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HAL unchanged at $37.59 at Jan2015 options expiration) = -$8.95
= ($37.59-$37.59)*300 - $8.95 commissions; OR
(c) Capital Appreciation (If HAL assigned at $40.00) = +$714.05
= ($40.00-$37.59)*300 - $8.95 commissions

Total Net Profit (If HAL unchanged at $37.59 at Jan2015 options expiration): +$361.85
= (+$370.80 +$0.00 -$8.95); OR
Total Net Profit (If HAL assigned at $40.00): +$1,084.85
= (+$370.80 +$0.00 +$714.05)

1. Absolute Return (If HAL unchanged at $37.59 at Jan2015 options expiration): +3.2%
= +$361.85/$11,285.95
Annualized Return If Assigned (ARIA): +31.6%
= (+$361.85/$11,285.95)*(365/37 days); OR
2. Absolute Return if Assigned (at $40.00 strike price): +9.6%
= +$1,084.85/$11,285.95
Annualized Return If Assigned (ARIA): +94.8%
= (+$1,084.85/$11,285.95)*(365/37 days)

The downside 'breakeven price' at expiration is at $36.29 ($37.59 - $1.30), which is 3.5% below the current market price of $37.59.
The 'crossover price' at expiration is $38.89 ($37.59 + $1.30). This is the price above which it would have been more profitable to simply buy-and-hold HAL stock until January 16th (the Jan2015 options expiration date) rather than establish this covered calls position.

Tuesday, December 9, 2014

Established a 100% Cash-Secured Puts Position in AT&T Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in AT&T Inc.(Ticker Symbol T) with a Jan2015 expiration and at the $32.00 strike price.  As detailed below, this investment will provide a +2.0% absolute return in 40 days (which is equivalent to a +18.5% annualized return) if AT&T closes at or above $32.00 at options expiration on January 16th.

Details of this transaction along with a potential return-on-investment result are: 

AT&T Inc. (Symbol T)
The transaction is as follows:
12/09/2014 Sold 4 out-of-the-money Jan2015 $32.00 Put options @ $.68
Note: The price of AT&T was $32.77 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the two Put options sold.

A possible overall performance result (including commissions) for this AT&T transaction would be as follows:
100% Cash-Secured Cost Basis: $12,800.00 = $32.00*400
Note:  the price of AT&T was $32.77 when the Put options were sold.

Net Profit:
(a) Options Income: +$260.05
= ($.68*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AT&T closes above $32.00 at the Jan2015 options expiration): +$0.00
= ($32.00-$32.00)*400 shares

Total Net Profit (If AT&T is above $32.00 strike price at Jan2015 options expiration): +$260.05 
= (+$260.05 +$0.00 +$0.00)

Absolute Return (If AT&T is above $32.00 at Jan2015 options expiration and Put options thus expire worthless): +2.0%
= +$260.05/$12,800.00
Annualized Return (If AT&T is above $32.00 at expiration): +18.5%
= (+$260.05/$12,800.00)*(365/40 days)

The downside 'breakeven price' at expiration is at $31.32 ($32.00 - $.68), which is 4.4% below the current market price of $32.77.
The 'crossover price' at expiration is $33.45 ($32.77 + $.68).  This is the price above which it would have been more profitable to simply buy-and-hold AT&T Inc. stock until January 16th (the Jan2015 options expiration date) rather than holding this short Puts option position.
Note: the stock price will decrease by the amount of the quarterly dividend upon the opening of the market on the ex-dividend date.  Although the quarterly dividend for Jan2015 has not yet been declared, it is likely that the ex-div date will be January 6th and the amount will be approximately $.46.

Established a 100% Cash-Secured Put Position in Google Inc.

Today, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Google Inc. (Ticker Symbol GOOG) with a Jan2015 expiration and at the $530.00 strike price.  As detailed below, this investment will provide a +3.4% absolute return in 40 days (which is equivalent to a +31.2% annualized return) if Google closes at or above $530.00 at options expiration on Jan 16th.

Details of this transaction along with a potential return-on-investment result are: 

Google Inc. (GOOG)
The transaction is as follows:
12/09/2014 Sold 1 Jan2015 $530.00 Put @ $18.20
Note: The price of Google was $522.64 when this transaction was executed.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the one Put option sold.

A possible overall performance result (including commissions) for this Google transaction would be as follows:
100% Cash-Secured Cost Basis: $53,000.00
= $530.00*100
Note:  the price of GOOG was $522.64 when the Put option was sold.

Net Profit:
(a) Options Income: +$1,810.30
= ($18.20*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GOOG closes above $530.00 at Jan2015 expiration): +$0.00
= ($530.00-$530.00)*100 shares

Total Net Profit (If GOOG is above $530.00 strike price at Jan2015 options expiration): +$1,810.30 
= (+$1,810.30 +$0.00 +$0.00)

Absolute Return (If GOOG is above $530.00 at Jan2015 options expiration and Put option thus expires worthless): +3.4%
= +$1,810.30/$53,000.00
Annualized Return (If GOOG is above $530.00 at expiration): +31.2%
= (+$1,810.30/$53,000.00)*(365/40 days)

The downside 'breakeven price' at expiration is at $511.80 ($530.00 - $18.20), which is 2.1% below the current market price of $522.64.
The 'crossover price' at expiration is $540.84 ($522.64 + $18.20).  This is the price above which it would have been more profitable to simply buy-and-hold Google Inc. stock until January 16th (the Jan2015 options expiration date) rather than holding this short Put option.