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Tuesday, May 22, 2018

Continuation of Delta Air Lines Inc. Covered Calls Position

Today, the Covered Calls position in Delta Air Lines Inc. (ticker DAL) was continued by selling 4 June 15th, 2018 $55.00 Call options against the existing 400 shares of Delta stock.  Airline stocks have declined as oil prices have increased in recent weeks; and Delta is no exception -- having declined in price by about $4 since it was purchased in January.  However, the Covered Calls Advisor remains confident in Delta's management and business prospects so will continue this Covered Calls position by selling Call options against the long stock position and thereby continue to reduce the breakeven price so that a modest profit is achieved from this position.  
A potential result for this Delta position is for a +2.4% absolute return over 143 days (equivalent to a +6.1% annualized return-on-investment) if Delta closes above the $55.00 strike price on the June 15th expiration date.  


Delta Air Lines Inc. (DAL) -- Continuation of Covered Calls Position
The detailed transactions and calculations are as follows:
01/23/2018  Bought 400 Delta Air Lines Inc. shares @ $59.63
01/23/2018 Sold 4 DAL Mar 16, 2018 $57.50 Call options @ $3.48
Note: this was a simultaneous buy/write transaction.
02/21/2018 $.305 ex-dividend per share
03/16/2018 4 DAL Mar 16th $57.50 Call options expired
03/29/2018 Sold 4 DAL Apr 20, 2018 $57.50 Call options @ $.77 per share
Note: the price of DAL was $55.21 when these Call options were sold
04/20/2018 4 DAL Call options expired with stock price below strike price 
05/10/2018 $.305 ex-dividend per share
05/22/2018 Sold 4 DAL June 15, 2018 $55.00 Call options @ $1.17 to continue Delta Covered Calls position
Note: the price of Delta stock was $54.60 when these Calls were sold

A possible overall performance result (including commissions) would be as follows:
Cost Basis Purchase of 400 shares DAL: $22,467.63
= ($59.63 -$3.48)*400 shares + $7.63 commissions

Net Profit Components:
(a) Options Income: +$2,152.74
= ($3.48 + $.77 + $1.17) *400 shares - 2*$7.63 commissions
(b) Dividend Income: $244.00
= $.305 per share x 400 shares x 2 dividend payments
(c) Capital Appreciation (If DAL stock closes above $55.00 strike price at expiration) : -$1,856.95
= ($55.00 -$59.63)* 400 shares - $4.95 commission

Net Profit Potential:
If Delta shares assigned on June 15th options expiration date: +$539.79
= (+$2,152.74 options income +$244.00 dividend income -$1,856.95 capital appreciation)

A Potential Return-on-Investment Result:
If DAL stock price is above $55.00 strike price at June 15th, 2018 options expiration date:
Absolute Return : +2.4%
= +$539.79/$22,467.63
Equivalent Annualized Return: +6.1%
= (+$539.79/$22,467.63)*(365/143 days)

Saturday, May 19, 2018

May 18th, 2018 Options Expiration Results

The Covered Calls Advisor Portfolio had six positions with May 18th, 2018 options expirations:
  • Three positions (Citigroup Inc., Sinclair Broadcast Group Inc., and U.S. Steel Corp.) have previously been rolled out to June 15th, 2018 Covered Calls positions and thus continue to be held in the Covered Calls Advisor Portfolio. 
  • Three positions (Alcoa Corp., Alibaba Group Holding Ltd, and Lam Research Corp.) closed yesterday in-the-money, so those shares were assigned (sold) at their respective strike prices.
So far in 2018, twenty-seven of thirty-two positions (84.4%) were assigned profitably and at an average annualized return-on-investment of +28.9%.  This 84.4% year-to-date result exceeds the Covered Calls Advisor's overall long-term goal of having at least 67% of positions closed out at a profit.  None of the remaining five positions (Blackstone Group, Citigroup Inc., Delta Air Lines Inc., Sinclair Broadcasting Group Inc., and U.S. Steel Corp.) have yet to be closed out, but instead currently remain as open positions in the Covered Calls Advisor Portfolio. 

For the three positions assigned at yesterday's May 18th expiration, the average annualized return-on-investment was +45.9%.  The results for each position was:
  • Alcoa Corp.:  +2.6% absolute return (+43.8% annualized return) in 22 days
  • Alibaba Group Holding Ltd.:  +7.7% absolute return (+42.5% annualized return) in 66 days 
  • Lam Research Corp.:  +4.2% absolute return (+51.4% annualized return) in 30 days
The cash now available in the Covered Calls Advisor Portfolio from the closing of these three positions will be retained until new Covered Calls and/or 100% Cash-Secured Puts positions are established.  Any new position(s) established with this available cash will be posted on this site on the same day the transactions occur.  

To demonstrate how return-on-investment results for a closed Covered Calls position are calculated, the details for one of the three assigned positions is detailed below:


Alcoa Corporation (AA) -- Covered Calls Position Closed

The transactions were as follows:
04/27/2018 Bought 400 shares of Alcoa stock @ $51.65 per share 
04/27/2018 Sold 4 Alcoa May 18th, 2018 $50.00 Call options @ $2.95 per share
Note: this was a simultaneous Buy/Write transaction
05/18/2018 4 AA Call options closed in-the-money and stock assigned at $50.00 strike price
Note: Closing price of AA stock was $50.83 upon 5/18/2018 options expiration.

The overall performance result (including commissions) was as follows:
Covered Calls Cost Basis: $19,487.63
= ($51.65 - $2.95) * 400 shares + $7.63 commission
Net Profit Components:
(a) Option Income: +$1,180.00
= ($2.95 * 400 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Alcoa stock was above $50.00 strike price at May 18th expiration): -$664.95
= ($50.00 -$51.65) * 400 shares - $4.95 commission

Total Net Profit (If assigned at expiration): +$515.05
= (+$1,180.00 options income +$0.00 dividend income -$664.95 capital appreciation)

Absolute Return: +2.6%
= +$515.05/$19,487.63
Equivalent Annualized Return: +43.8%
= (+$515.05/$19,487.63)*(365/22 days)

Friday, May 18, 2018

Roll Outs -- Citigroup Inc. and Sinclair Broadcast Group Inc.

Today, the Covered Calls Advisor decided to roll out two May 18th Covered Calls to the June 15th expiration date.

A Covered Calls position in Citigroup Inc. (ticker C) was rolled out from today's (May 18th, 2018) options expiration at the  $67.50 strike price to another $67.50 strike for next month's June 15th expiration.  A Call options roll out limit order was established at a net credit of $.73, and the transaction was executed within a few minutes as follows:
Buy-to-Close 5 Citigroup May 18th, 2018 Call options @ $2.40
Sell-to-Open 5 Citi June 15, 2018 Call options              @ $3.13
Net Credit Received                                                             $ .73

The Covered Calls in Sinclair Broadcast Group Inc.were rolled down from today's $30.00 strike to June 15th's $29.00 strike price at a net credit of $1.53 ($1.93-$.40).

As detailed below, potential investment results are:
  • Citigroup Inc. -- A +2.7% absolute return in 53 days (which is equivalent to a +18.6% annualized return-on-investment) if Citigroup stock closes above the $67.50 strike price on the June 15th options expiration date.  
  • Sinclair Broadcast Group Inc. -- A +1.3% absolute return in 100 days (which is equivalent to a +4.6% annualized return-on-investment) if Sinclair stock closes above the $29.00 strike price on the June 15th options expiration date. 

The transaction history and potential return on investment results are as follows:

1.  Citigroup Inc. (C) --Roll Out of Covered Calls Position 
The transactions were as follows:
04/23/2018 Bought 500 shares of Citigroup stock @ $69.73 per share 
04/23/2018 Sold 5 Citigroup May 18th, 2018 $67.50 Call options @ $3.01 per share
Note: this was a simultaneous Buy/Write transaction
05/04/2018 $160.00 ex-dividend = $.32 per share x 500 shares
05/18/2018 Bought-to-Close 5 Citi May 18th $67.50 Call options
05/18/2018 Sold-to-Open 5 Citi June 15, 2018 $67.50 Call options
Note: the price of Citi stock was $69.89 when this Call spread transaction occurred today

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $33,368.30
= ($69.73 - $3.01)* 500 shares + $8.30 commission

Net Profit Components:
(a) Options Income: +$1,861.70
= ($3.01 -$2.40 + $3.13) * 500 shares -$8.30 commissions
(b) Dividend Income: +$160.00 = $.32 per share * 500 shares 
(c) Capital Appreciation (If Citi is above $67.50 strike price at June 15th expiration): -$1,119.95
= ($67.50 -$69.73)* 500 shares - $4.95 commission

Total Net Profit: +$901.75
= (+$1,861.70 options income +$160.00 dividend income -$1,119.95 capital appreciation)

Absolute Return: +2.7%
= +$901.75/$33,368.30
Equivalent Annualized Return: +18.6%
= (+$901.75/$33,368.30)*(365/53 days)



2.  Sinclair Broadcast Group Inc. (SBGI) -- Roll Out of Covered Calls Position
The transactions were as follows:
03/07/2018 Bought 400 shares of Sinclair stock @ $33.40 per share 
03/07/2018 Sold 4 Sinclair March 16th, 2018 $33.00 Call options @ $1.00 per share
Note: this was a simultaneous Buy/Write transaction
03/08/2018 Ex-dividend of $72.00 ($.18 per share x 400 shares)
03/15/2018 4 March 16th Call options expired
03/27/2018 Sold 4 Sinclair April 20th, 2018 $32.00 Call options @ $1.45 per share
04/20/2018 4 Sinclair April 20th Call options expired
05/09/2018 Sold 4 Sinclair May 18th, 2018 $30.00 Call options @ $.52 per share
05/18/2018 Bought-to-Close 4 SBGI May 18th $30.00 Call options
05/18/2018 Sold-to-Open 4 SBGI June 15, 2018 $29.00 Call options
Note: the price of Sinclair stock was $30.33 when this Call spread transaction occurred today
05/31/2018 Upcoming Ex-dividend of $72.00 ($.18 per share x 400 shares)

A possible overall performance result (including commissions) would be as follows:
Covered Calls Cost Basis: $12,967.63
= ($33.40 - $1.00)* 400 shares + $7.63 commission

Net Profit Components:
(a) Options Income: +$1,784.84
= ($1.00 + $1.45 + $.52 -$.40 + $1.93) * 400 shares - 2 * $7.58
(b) Dividend Income: +$144.00
= 2 x ($.18 per share * 400 shares) 
(c) Capital Appreciation (If SBGI is above $29.00 strike price at June 15th expiration): -$1,764.95
= ($29.00 -$33.40)* 400 shares - $4.95 commission

Potential Total Net Profit (If assigned at expiration): +$163.89
= (+$1,784.84 options income +$144.00 dividend income -$1,764.95 capital appreciation)

Absolute Return: +1.3%
= +$163.89/$12,967.63
Equivalent Annualized Return: +4.6%
= (+$163.89/$12,967.63)*(365/100 days)