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)

Thursday, April 16, 2015

Early Exercise of JPMorgan Chase Co. Covered Calls Position

This morning prior to market open, notification was received from my broker via both email and phone message that the covered calls position in JPMorgan Chase Co. (Ticker Symbol JPM) with a Apr2015 expiration and at the $60.00 strike price was exercised early. The shares of JPMorgan had risen to $64.21 as of yesterday's close, so the time value remaining in the call option had declined to the point where the owner of the option decided to exercise his/her option to buy the shares at $60.00.

The actual return-on-investment result for this closed position was 1.7% absolute return (equivalent to +22.4% annualized return for the 28 day holding period).  Early assignment provides a somewhat higher annualized return than if the position had been assigned two days later (at Apr2015 expiration), so this is desirable outcome for this position.

The details of the overall performance result (including commissions) for this JPMorgan covered calls position was as follows:
Stock Purchase Cost: $12,260.95
= ($61.26*200+$8.95 commission)

Net Profit:
(a) Options Income: +$391.55
= ($2.01*200 shares) - $10.45 commissions

(b) Dividend Income: +$80.00
= ($.40 dividend per share x 200 shares); or
(c) Capital Appreciation (If options exercised at $60.00 at Apr2015 expiration): -$260.95
+($60.00-$61.26)*200 - $8.95 commissions

Total Net Profit (stock sold at $60.00 based on early exercise of options): +$210.60
= (+$391.55 +$80.00 -$260.95)

Absolute Return: +1.7%
= +$210.60/$12,260.95
Annualized Return: +22.4%
= (+$210.60/$12,260.95)*(365/28 days)

Friday, April 3, 2015

Short 100% Cash-Secured Puts Position in Apple Inc. -- Closed

The Covered Calls Advisor's short position in two Apple Inc. (Symbol AAPL) April 2nd, 2015 $122.00 Weekly Put options expired yesterday since Apple Inc. closed above the $122.00 strike price. This result achieved the maximum profit potential from this Weekly position of +0.7% absolute return (+26.8% annualized) for the 9 days holding period. This transaction and the return-on-investment result is detailed below

1. Apple Inc. (AAPL)
The transactions were as follows:
03/25/2015 Sold 2 AAPL Apr 2nd $122.00 Put Options @ $.86
Note: the price of AAPL was $124.46 today when these options were sold.
04/02/2015 2 short AAPL options expired
Note: the price of AAPL was $125.32 upon options expiration 

The overall performance result (including commissions) for these short Apple Inc. Put options was:
Stock Purchase Cost: $24,408.95
= ($122.00*200+$8.95 commission)

Net Profit:
(a) Options Income: +$161.55
= 200*$.86 - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation = +$0.00 (short Put options expired)


Total Net Profit: +$161.55
= (+$161.55 +$0.00 +$0.00)

Absolute Return: +0.7%
= +$161.55/$24,408.95
Annualized Return: +26.8%
= (+$161.55/$24,408.95)*(365/9 days)

Thursday, April 2, 2015

Established Short 100% Cash-Secured Puts Position in General Motors Co.

Today, the Covered Calls Advisor established a 100% cash-secured Puts position in General Motors Co. (Symbol GM) by selling 3 Apr2015 Put options at the $36.00 strike price. This position indicates that the Covered Calls Advisor is willing to purchase GM shares at $36.00 (for future covered calls investments) upon the market close on April 17th if the stock declines to below $36.00 at that time.  This is a somewhat conservative investment since GM stock was at $36.37 (1.0% above the strike price) when this position was established.

As detailed below, this investment will achieve a +1.2% absolute return in 16 days (which is equivalent to a +27.4% annualized return) if the GM stock price remains above $36.00 at the April 17th options expiration date.

This transaction and the associated potential return-on-investment result is detailed below.

1.  GM Co. (GM) -- New Position
The transaction was 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.

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

A possible overall performance result (including commissions) for this transaction would be 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 (If GM is above $36.00 strike price at Apr2015 expiration): +$0.00
= ($36.00-$36.00)*300 shares

Total Net Profit (If GM is above $36.00 strike price upon the Apr2015 options expiration): +$129.80
= (+$129.80 +$0.00 +$0.00)

Absolute Return (If GM is above $36.00 strike price at Apr2015 options expiration): +1.2%
= +$129.80/$10,800.00
Annualized Return: +27.4%
= (+$129.80/$10,800.00)*(365/16 days)

The downside 'breakeven price' at expiration is at $35.53 ($36.00 - $.47), which is 2.3% below the current market price.
The 'crossover price' at expiration is $36.84 ($36.37 + $.47).  This is the price above which it would have been more profitable to simply buy-and-hold GM stock until April 17th (the Apr2015 options expiration date) rather than holding this short Put option.

Wednesday, April 1, 2015

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

Today, the Covered Calls Advisor established a 100% cash-secured Put position in Google Inc. (Symbol GOOG) by selling 1 Apr2015 Put option at the $535.00 strike price. This position indicates that the Covered Calls Advisor is willing to purchase Google Inc. shares at $535.00 (for future covered calls investments) upon the market close on April 17th if the stock declines to below $535.00 at that time.  This is a somewhat conservative investment since Google stock was at $543.41 (1.5% above the strike price) when this position was established.

As detailed below, this investment will achieve a +1.6% absolute return in 17 days (which is equivalent to a +33.7% annualized return) if the Google stock price remains above $535.00 at the April 17th options expiration date.

This transaction and the associated potential return-on-investment result is detailed below.

1.  Google Inc. (GOOG) -- New Position
The transaction was 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.

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

A possible overall performance result (including commissions) for this transaction would be 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 (If GOOG is above $535.00 strike price at Apr2015 expiration): +$0.00
= ($535.00-$535.00)*100 shares

Total Net Profit (If GOOG is above $535.00 strike price upon the Apr2015 options expiration): +$840.30
= (+$840.30 +$0.00 +$0.00)

Absolute Return (If GOOG is above $535.00 strike price at Apr2015 options expiration): +1.6%
= +$840.30/$53,500.00
Annualized Return: +33.7%
= (+$840.30/$53,500.00)*(365/17 days)

The downside 'breakeven price' at expiration is at $526.50 ($535.00 - $8.50), which is 3.1% below the current market price.
The 'crossover price' at expiration is $551.91 ($543.41 + $8.50).  This is the price above which it would have been more profitable to simply buy-and-hold Google stock until April 17th (the Apr2015 options expiration date) rather than holding this short Put option.