Friday, July 31, 2015

Covered Calls Position Established in Exxon Mobil Corp.

Today, a new covered calls position was established in Exxon Mobil Corporation (ticker symbol XOM) with an Aug2015 expiration.  The Exxon Mobil stock was purchased at $78.96 after today's disappointing earnings release when the stock price had declined by almost 5% from yesterday's closing price.  The Aug2015 Call options were simultaneously (i.e. a single buy-write transaction was made) sold at the $78.00 strike price for $1.80 each.

This covered calls investment is a strategic one that explicitly considers the upcoming quarterly dividend with an ex-dividend date (Aug 11th) prior to the August 21st options expiration date.  Details of this position is provided below.

1. Exxon Mobil Corp. (XOM)

A $.73 quarterly dividend goes ex-dividend on August 11th.  Although unlikely, if the current time value (i.e. extrinsic value) of $.84 [$1.80 option premium - ($78.96 stock price - $78.00 strike price)] remaining in the short call options decay substantially below the $.73 dividend amount by August 10th (the day prior to the ex-div date), then there is a possibility that the call option owner will exercise early and will call the stock away to capture the dividend.

As shown below, two potential return-on-investment results for this position are:
If Early Assignment: +0.9% absolute return (equivalent to +31.2% annualized return for the next 11 days) if the stock is assigned early (the day prior to Aug 11th ex-div date); OR
If Dividend Capture:  +1.9% absolute return (equivalent to +29.6% annualized return over the next 23 days) if the stock is assigned at Aug2015 expiration on August 21st.

07/31/2015 Bought 200 XOM shares @ $78.96
07/31/2015 Sold 2 XOM Aug2015 $78.00 Call options @ $1.80
Note: the price of XOM was $78.96 today when these Call options were sold.
08/11/2015 Upcoming ex-dividend of $.73 per share

Two possible overall performance results (including commissions) for this Exxon Mobil Corp. (XOM) covered calls position are as follows:
Stock Purchase Cost: $15,800.95
= ($78.96*200+$8.95 commission)

Net Profit:
(a) Options Income: +$349.55
= ($1.80*200 shares) - $10.45 commissions
(b) Dividend Income (If option exercised early on day prior to Aug 11th ex-div date): +$0.00; or
(b) Dividend Income (If stock assigned at Aug2015 expiration): +$146.00
= ($.73 dividend per share x 200 shares)
(c) Capital Appreciation (If stock assigned early on Aug 10th): -$200.95
+($78.00-$78.96)*200 - $8.95 commissions; or
(c) Capital Appreciation (If stock assigned at $78.00 at Aug2015 expiration): -$200.95
+($78.00-$78.96)*200 - $8.95 commissions

Total Net Profit (If option exercised on day prior to Aug 11th ex-div date): +$148.60
= (+$349.55 +$0.00 -$200.95); or
Total Net Profit (If stock assigned at $78.00 at Aug2015 expiration): +$294.60
= (+$349.55 +$146.00 -$200.95)

1. Absolute Return (If option exercised on day prior to ex-div date): +0.9%
= +$148.60/$15,800.95
Annualized Return (If option exercised early): +31.2%
= (+$148.60/$15,800.95)*(365/11 days); OR

2. Absolute Return (If stock assigned at $78.00 at Aug2015 expiration): +1.9%
= +$294.60/$15,800.95
Annualized Return (If stock assigned): +29.6%
= (+$294.60/$15,800.95)*(365/23 days)

Either outcome would provide a very good return.  These returns will be achieved as long as the stock is above the $78.00 strike price at assignment.

Sunday, May 24, 2015

Closed Three Positions -- Hertz, United Continental, and YRC Worldwide

This Covered Calls Advisor closed three positions (Hertz Global Holdings Inc., United Continental Holdings Inc., and YRC Worldwide Inc.) in the portfolio by selling the long stock positions.


The detailed transactions for each position as well as the return-on-investment performance are as follows:

1.  Hertz Global Holdings Inc. (HTZ) -- Closed
The transactions were as follows:
04/29/2015 Sold 4 Hertz Global Holdings Inc. May2015 $21.00 Puts @ $.65
Note: The price of HTZ was $20.84 when this transaction was executed. 
05/15/2015 Four HTZ Puts expired and 400 shares of Hertz stock was purchased at the $21.00 strike price
Note: the price of HTZ was $20.60 upon May2015 options expiration
05/22/2015 Closed out Hertz position by selling 400 shares of HTZ stock at $20.96

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

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $8,400.00
= $21.00*400
Note: the price of HTZ was $20.84 when these Put options were sold.

Net Profit:
(a) Options Income: +$248.05
= ($.65*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$24.95
= ($20.96-$21.00)*400 shares - $8.95 commissions

Total Net Profit: +$223.10
= (+$248.05 +$0.00 -$8.95)

Absolute Return: +2.7%
= +$223.10/$8,400.00
Annualized Return: +42.1%
= (+$223.10/$8,400.00)*(365/23 days) 



2. United Continental Holdings Inc. (UAL) -- Closed
The transactions were as follows:
03/24/2015  Sold 3 UAL 100% cash-secured $64.00 Apr2015 Put options @ $1.25
Note: The price of UAL was $67.70 when this transaction was executed.
04/17/2015 3 UAL Puts expired and 300 shares of United Continental stock was purchased at the $64.00 strike price
Note: the price of UAL was $61.49 upon Apr2015 options expiration
05/05/2015 Closed out United Continental position by selling 300 UAL stock at $59.41 per share

The overall performance result (including commissions) was as follows:
100% Cash-Secured Cost Basis: $19,200.00
= $64.00*300

Net Profit:
(a) Options Income: +$363.80
= ($1.25*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$1,377.00
= ($59.41-$64.00)*300 shares

Total Net Profit: -$1,013.20
= (+$363.80 +$0.00 -$1,377.00)

Absolute Return: -5.3%
= -$1,103.20/$19,200.00
Annualized Return: -45.9%
= (-$1,103.20/$19,200.00)*(365/42 days)



3.  YRC Worldwide Inc. (YRCW) -- Closed
The transactions are as follows:
02/23/2015  Sold 4 YRCW Mar2015 $20.00 100% cash-secured Put options @ $1.30
Note: The price of YRCW was $19.67 when this transaction was executed.
04/17/2015 4 YRCW Puts expired and 400 shares of YRW Worldwide stock was purchased at the $20.00 strike price
Note: the price of YRCW was $16.08 upon Apr2015 options expiration
05/05/2015 Closed out YRC Worldwide position by selling 400 YRCW stock at $13.77 per share
The overall performance result (including commissions) was as follows:
100% Cash-Secured Cost Basis: $8,000.00
= $20.00*400

Net Profit:
(a) Options Income: +$696.10
= ($1.30 + $.50)*400 shares - 2*$11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$2,492.00
= ($13.77 - $20.00)*400 shares

Total Net Profit: -$1,795.90
= (+$696.10 +$0.00 -$2,492.00)

Absolute Return: -22.4%
= -$1,795.90/$8,000.00
Annualized Return: -115.4%
= (-$1,795.90/$8,000.00)*(365/71 days)

Wednesday, April 29, 2015

Established New Short 100% Cash-Secured Puts Position in Hertz Global Holdings Inc.

Today, the Covered Calls Advisor established a new position in the Hertz Global Holdings Inc. (ticker symbol HTZ) by selling 4 May2015 $21.00 Put options.  As detailed below, this investment will yield a +3.0% absolute return in 18 days (which is equivalent to a +59.9% annualized return-on-investment) if Hertz stock closes above the $21.00 strike price on the May 15th options expiration date.

The transaction and a potential return-on-investment result is:

1.  Hertz Global Holdings Inc. (HTZ) -- New Position
The transaction was as follows:
04/29/2015 Sold 4 Hertz Global Holdings Inc. May2015 $21.00 Puts @ $.65
Note: The price of HTZ was $20.84 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 four Put options sold.

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $8,400.00
= $21.00*400
Note:  the price of HTZ was $20.84 when these Put options were sold.

Net Profit:
(a) Options Income: +$248.05
= ($.65*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HTZ is above $21.00 strike price at May2015 expiration): +$0.00
= ($21.00-$21.00)*400 shares

Total Net Profit (If HTZ is above $21.00 strike price at May2015 options expiration): +$248.05
= (+$248.05 +$0.00 +$0.00)

Absolute Return (If HTZ is above $21.00 strike price at May2015 options expiration): +3.0%
= +$248.05/$8,400.00
Annualized Return (If HTZ is above $20.00 at expiration): +59.9%
= (+$248.05/$8,400.00)*(365/18 days)

The downside 'breakeven price' at expiration is at $20.35 ($21.00 - $.65), which is 2.4% below the current market price of $20.84.
The 'crossover price' at expiration is $21.49 ($20.84 + $.65).  This is the price above which it would have been more profitable to simply buy-and-hold HTZ until May 15th (the May2015 options expiration date) rather than selling these Put options.

Closed Two Positions -- Google Inc. and Micron Technology Inc.

This Monday, following last week's April options expiration, the Covered Calls Advisor closed two positions (Google Inc. and Micron Technology Inc.) in the portfolio by selling the long stock positions.

The return-on-investment performance for these closed positions are:

  • Google Inc. = +7.1% absolute return (equivalent to +96.5% annualized return for the 27 days holding period)
  • Micron Technology Inc. = +1.2% absolute return (equivalent to +6.5% annualized return for the 67 days holding period)
  •  
    The transactions and the performance result for each position is detailed below.

    1. Google Inc. (GOOG) -- Closed
    The transactions were as follows:
    04/01/2015 Sold 1 Google Inc. Apr2015 $535.00 Put @ $8.50
    Note: The price of GOOG was $543.41 when this transaction was executed.
    04/17/2015 One put option assigned and 100 shares of GOOG purchased @ $535.00 strike price.   Note: GOOG price was $524.05 upon options expiration. 04/27/2015 Sold 100 Google Inc. shares @ $564.79
    The overall performance result (including commissions) for these transactions was as follows:
    100% Cash-Secured Cost Basis: $53,500.00
    = $535.00*100
    Note:  the price of GOOG was $543.41 when the Put option was sold.

    Net Profit:
    (a) Options Income: +$840.30
    = ($8.50*100 shares) - $9.70 commissions
    (b) Dividend Income: +$0.00
    (c) Capital Appreciation: +$2,979.00
    = ($564.79-$535.00)*100 shares

    Total Net Profit: +$3,819.30
    = (+$840.30 +$0.00 +$2,979.00)


    Absolute Return: +96.5%
    = +$3,819.30/$53,500.00
    Annualized Return: +33.7%
    = (+$3,819.30/$53,500.00)*(365/27 days)



    2. Micron Technology Inc. (MU) -- Closed
    The transactions are as follows:
    02/19/2015 Sold 4 Micron Technology Inc. Mar2015 $30.00 Puts @ $.53
    Note: The price of Micron was $31.88 when this transaction was executed.
    03/20/2015 4 MU Mar2015 Put options assigned and 300 shares of MU purchased at $30.00 strike price
    Note: the price of Micron was $28.68 upon Mar2015 options expiration.
    03/23/2015 Sold 4 MU Apr2015 $30.00 Call options @ $.54
    Note: MU stock was $28.68 when these options were sold.
    04/17/2015 Four call options expired and 400 shares of stock retained.  
    04/27/2015 Sold 400 shares Micron at $29.37 each

    The overall performance result (including commissions) for these Micron Technology transactions was as follows:
    100% Cash-Secured Cost Basis: $12,000.00
    = $30.00*400

    Net Profit:
    (a) Options Income: +$404.10
    = ($.53+$.54)*400 shares - 2*$11.95 commissions
    (b) Dividend Income: +$0.00
    (c) Capital Appreciation: -$260.95
    = ($29.37 - $30.00) * 400 shares - $8.95 commission

    Total Net Profit: +$143.15 
    = (+$404.10 +$0.00 -$260.95)

    Absolute Return: +1.2%
    = +$143.15/$12,000.00
    Annualized Return (If MU is above $30.00 at expiration): +6.5%
    = (+$143.15/$12,000.00)*(365/67 days)

Sunday, April 19, 2015

April 2015 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained eleven positions with April 2015 expirations.  The results are as follows:

- Seven of the eleven positions (Alcoa Inc., Baidu Inc., BP Plc ADR, General Motors Co., Dow Chemical Co., Virgin America Inc., and Yamana Gold Inc.) were closed out at expiration. This was the optimal result for these positions in that the maximum potential return-on-investment (ROI) results was achieved from when each of these positions was established.  The annualized ROI for these closed positions are:

  • Alcoa Inc. = -8.1% absolute return (equivalent to -55.8% annualized return for the 53 days holding period)
  • Baidu Inc. = +1.9% absolute return (equivalent to +28.2% annualized return for the 24 days holding period)
  • BP Plc ADR = +1.6% absolute return (equivalent to +16.0% annualized return for the 37 days holding period)
  • General Motors Co. = +1.2% absolute return (equivalent to +27.4% annualized return for the 16 days holding period)
  • Dow Chemical Co. = +2.1% absolute return (equivalent to +25.4% annualized return for the 30 days holding period)
  • Virgin America Inc. = +2.9% absolute return (equivalent to +32.8% annualized return for the 32 days holding period)
  • Yamana Gold Inc. = +11.4% absolute return (equivalent to +70.7% annualized return for the 59 days holding period)

The detailed transactions history and results for each of these positions is detailed below. The cash available from the closing of these positions will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established.

- Four of the eleven positions (Google Inc., Micron Technology Inc., United Continental Holdings Inc. and YRC Worldwide Inc.) ended at expiration with the price of the stocks below the strike prices.  So the respective options expired and the long shares are now retained in the Covered Calls Advisor Portfolio.  A decision will be made soon to either sell these shares or to establish a covered calls position by selling future Call options against the current long stock holdings. When these decisions are made and the accompanying transactions are completed, a post will be made on this blog on the same day along with the detailed transactions to-date for each position.

Details of the nine closed positions summarized above and the associated return-on-investment results are as follows:

1. Alcoa Inc. (AA) -- Closed
The transactions were as follows:
02/23/2015  Sold 3 AA Mar2015 $15.00 100% cash-secured Put options @ $.33
Note: The price of AA was $15.47 when this transaction was executed.

03/20/2015 3 AA Mar2015 Put options assigned and 300 shares of AA purchased at $15.00 strike price
Note: the price of Alcoa was $12.97 upon Mar2015 options expiration.
03/23/2015 Sold 3 Apr2015 $13.00 Call options @ $.53
Note: AA stock was $13.02 when these options were sold.
04/17/2015 3 Call options were exercised and the 300 shares of Alcoa stock were sold at the $13.00 strike price
Note: the price of AA was $13.46 upon options expiration

The overall performance result (including commissions) for this Alcoa position was as follows:
100% Cash-Secured Cost Basis: $4,500.00
= $15.00*300

Net Profit:
(a) Options Income: +$235.60
= ($.33+$.53)*300 shares - 2*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: -$600.00
= ($13.00 - $15.00)*300 shares

Total Net Profit: -$364.40 
= (+$235.60 +$0.00 -$600.00)

Absolute Return: -8.1%
= -$364.40/$4,500.00
Annualized Return: -55.8%
= (-$364.40/$4,500.00)*(365/53 days)



2. Baidu Inc. (BIDU) -- Closed
The transactions were as follows:
03/25/2015 Sold 2 BIDU Apr2015 $205.00 Put Options @ $3.90
Note: the price of BIDU was $207.85 today when these two Put options were sold.
04/17/2015 2 Put options expired
Note: the price of BIDU was $207.87 when these Put options expired

The overall performance result (including commissions) for these Baidu short Put options is as follows:
Stock Purchase Cost: $41,008.95
= ($205.00*200+$8.95 commission)

Net Profit:
(a) Options Income: +$769.55
= 200*$3.90 - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation = -$8.95
= ($205.00-$205.00)*200 - $8.95 commissions

Total Net Profit: +$760.60
= (+$769.55 +$0.00 -$8.95)

Absolute Return: +1.9%
= +$760.60/$41,008.95
Annualized Return: +28.2%
= (+$760.60/$41,008.95)*(365/24 days)


3. BP Plc ADR (BP) -- Closed
The transactions were as follows:
03/13/2015 Bought 200 BP shares @ $37.22
03/13/2015 Sold 2 BP Apr2015 $36.00 Call Options @ $1.92
Note: the price of BP was $37.22 today when these options were sold.
04/17/2015 2 BP Call options were exercised and the 200 shares of BP stock were sold at the $36.00 strike price
Note: the price of BP was $42.89 upon options expiration

The overall performance result (including commissions) for these BP Plc ADR covered calls is as follows:
Stock Purchase Cost: $7,452.95
= ($37.22*200+$8.95 commission)

Net Profit:
(a) Options Income: +$373.55
= 200*$1.92 - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation = -$252.95
= ($36.00-$37.22)*200 - $8.95 commissions

Total Net Profit: +$120.60
= (+$373.55 +$0.00 -$252.95)

Absolute Return: +1.6%
= +$120.60/$7,452.95
Annualized Return: +16.0%
= (+$120.60/$7,452.95)*(365/37 days)


4. General Motors Co. (GM) -- Closed
The transactions were as follows:
04/02/2015 Sold 3 GM Co. Apr2015 $36.00 Puts @ $.47
Note: The price of GM was $36.37 when this transaction was executed.
04/17/2015 3 GM Put options expired
Note: the price of GM was $36.64 when these Put options expired

The overall performance result (including commissions) for this transaction was as follows:
100% Cash-Secured Cost Basis: $10,800.00
= $36.00*300
Note:  the price of GM was $36.37 when the Put options were sold.

Net Profit:
(a) Options Income: +$129.80
= ($.47*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$0.00
= ($36.00-$36.00)*300 shares

Total Net Profit: +$129.80
= (+$129.80 +$0.00 +$0.00)

Absolute Return: +1.2%
= +$129.80/$10,800.00
Annualized Return: +27.4%
= (+$129.80/$10,800.00)*(365/16 days)


5. Dow Chemical Co. (DOW) -- Closed
The transactions were as follows:
03/19/2015 Bought 200 DOW shares @ $46.59
03/19/2015 Sold 2 DOW Apr2015 $46.00 Call options @ $1.24
Note: the price of DOW was $46.59 today when these Call options were sold.
03/27/2015 Upcoming ex-dividend of $.42 per share
04/17/2015 2 DOW Call options were exercised and the 200 shares of DOW stock were sold at the $46.00 strike price
Note: the price of DOW was $49.66 upon options expiration

The overall performance result (including commissions) for this Dow Chemical Co. (DOW) covered calls position was as follows:
Stock Purchase Cost: $9,326.95
= ($46.59*200+$8.95 commission)

Net Profit:
(a) Options Income: +$237.55
= ($1.24*200 shares) - $10.45 commissions

(b) Dividend Income: +$84.00
= ($.42 dividend per share x 200 shares)
(c) Capital Appreciation: -$126.95
+($46.00-$46.59)*200 - $8.95 commissions

Total Net Profit: +$194.60
= (+$237.55 +$84.00 -$126.95)

Absolute Return: +2.1%
= +$194.60/$9,326.95
Annualized Return: +25.4%
= (+$194.60/$9,326.95)*(365/30 days)


6. Virgin America Inc. (VA) -- Closed
The transactions were as follows:
03/18/2015 Sold 3 Virgin America Inc. Apr2015 $30.00 Puts @ $.90
Note: The price of VA was $32.03 when this transaction was executed.
04/17/2015 3 VA Put options expired
Note: the price of Virgina America stock was $30.55 when these Put options expired

A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $9,000.00
= $30.00*300
Note:  the price of VA was $32.03 when these Put options were sold.

Net Profit:
(a) Options Income: +$258.80
= ($.90*300 shares) - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$0.00
= ($30.00-$30.00)*300 shares

Total Net Profit: +$258.80
= (+$258.80 +$0.00 +$0.00)

Absolute Return: +2.9%
= +$258.80/$9,000.00
Annualized Return: +32.8%
= (+$258.80/$9,000.00)*(365/32 days)


7. Yamana Gold Inc. (AUY) -- Closed
The transactions are as follows:
02/17/2015 Sold 10 Yamana Gold Mar2015 $4.00 Puts @ $.28
Note: The price of AUY was $3.99 when this transaction was executed.
03/20/2015 10 AUY Mar2015 Put options expired
Note: the price of Yamana Gold was $3.91 upon Mar2015 options expiration.
03/23/2015 Sold 10 Apr2015 $4.00 Call options @ $.21
Note: AUY stock was $4.01 when these options were sold.
04/17/2015 10 AUY Call options were exercised and the 1,000 shares of Yamana stock were sold at the $4.00 strike price
Note: the price of AUY was $4.02 upon options expiration

The overall performance result (including commissions) for these transactions was as follows:
100% Cash-Secured Cost Basis: $4,000.00
= $4.00*1,000
Note:  the price of AUY was $4.00 when these Put options were sold.

Net Profit:
(a) Options Income: +$457.10
= ($.28 + $.21)*1,000 shares - 2*$16.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$0.00
= ($4.00 - $4.00)*1,000 shares

Total Net Profit: +$457.10
= (+457.10 +$0.00 +$0.00)

Absolute Return: +11.4%
= +$457.10/$4,000.00
Annualized Return: +70.7%
= (+$457.10/$4,000.00)*(365/59 days)