The Covered Calls Advisor Portfolio had five positions with August 17th, 2018 options expirations:
- Two Covered Calls positions (Blackstone Group L.P. and Deere & Co.) closed at yesterday's monthly options expiration in-the-money (stock price above the options strike price), so
those shares were assigned (sold) at their respective strike prices.
- Three positions (Metlife Inc., Skyworks Solutions Inc., and U.S. Steel Corp.) closed with the stock price below the strike price, so the options expired and the long stock positions now remain in the Covered Calls Advisor Portfolio. Within the next few days, these stocks will either be sold or next month Call options will be sold against the stock to re-establish Covered Calls positions. As always, all transactions will be posted on this blog on the same day they occur.
For the two positions assigned on the August 17th expiration, the
average annualized return-on-investment results were:
- Blackstone Group L.P.: +3.0% absolute return (+45.8% annualized return) in 24 days
- Deere & Co: +5.8% absolute return (+49.0% annualized return) in 45 days
The cash now available in
the Covered Calls Advisor Portfolio from the closing of these two 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. However, there are three important factors (near all-time high stock market valuations, tightening monetary policies, and rising trade tensions) that are, for the time being, causing the Covered Calls Advisor to increase cash (i.e. money-market) holdings to a majority position in the overall portfolio.
So far in 2018, thirty-six of thirty-nine positions (92.3%) were
assigned profitably
. This far exceeds the Covered Calls
Advisor's overall long-term goal
of having at least two-thirds (67%) of positions closed out at a profit. None of
the remaining three positions (Metlife Inc., Skyworks Solutions Inc., and U.S. Steel Corp.) have yet to be closed
out, but instead are currently held as open long stock positions in the Covered Calls
Advisor Portfolio.
For the thirty-six positions closed out so far in 2018, the average annualized return-on-investment is
+29.3%.
To demonstrate how return-on-investment results for a closed Covered Calls position are calculated, the details for the Blackstone Group assigned position is detailed below:
Blackstone Group L.P. (BX) -- Covered Calls Position Closed
The transactions were as follows:
07/25/2018 Bought 500 shares of Blackstone Group stock @ $35.91 per share
07/25/2018 Sold 5 BX August 17th, 2018 $36.00 Call options @ $.41 per share
07/27/2018 BX went ex-dividend at $.58 per share
08/17/2018 5 Call options were in-the-money at options expiration, so the 500 shares of Blackstone stock were sold at the $36.00 strike price
The overall performance result (including commissions) was:
Covered Calls Cost Basis: $17,758.30
= ($35.91 - $.41)* 500 shares + $8.30 commissions
Net Profit Components:
(a) Options Income: +$205.00
= ($.41* 500 shares)
(b) Dividend Income: +$290.00
= $.58 ex-div per share x 500 shares
(c) Capital Appreciation (BX stock was assigned at $36.00 strike price at Aug 17th expiration): +$40.05
= ($36.00 -$35.91)* 500 shares - $4.95 commission
Total Net Profit: +$535.05
= (+$205.00 options income +$290.00 dividend income +$40.05 capital appreciation)
Absolute Return: +3.0%
= +$535.05/$17,758.30
Equivalent Annualized Return: +45.8%
= (+$535.95/$17,758.30)*(365/24 days)
This result is an example of the 'trifecta' that can sometimes be achieved via Covered Calls investing. Profit contributions were obtained from all three possible sources: Call options income, dividend income, and stock capital appreciation.
