Monday, October 20, 2014

October 2014 Expiration Results

The Covered Calls Advisor Portfolio (CCAP) contained nine positions with October 2014 expirations.  The results for these nine positions so far are as follows:

- Only one of the nine positions (Citigroup Inc.) was closed out at expiration. This was the optimal result for this position in that the maximum potential return-on-investment (ROI) results was achieved from when this Cititgroup October position was established.  The annualized ROI for this closed position is:
Citigroup Inc. = +0.9% absolute return (equivalent to +15.7% annualized return for the 20 day holding period)

The detailed transactions history and result for this Citigroup position is detailed below. The cash available from the closing of this position will be retained in the Covered Calls Advisor Portfolio until new covered calls and/or 100% cash-secured puts positions are established (most likely in the next week or two). These transactions will be posted on this blog the same day they occur.

- Eight of the nine positions (Agnico Eagle Mines, American Airlines, Bidu, Chevron, EMC Corp, Google, Halliburton, and Micron Technology) ended at expiration with the price of the stocks below the strike prices.  So the respective options expired and the long shares were retained in the Covered Calls Advisor Portfolio.  A decision will be made early this week to either sell these shares or to establish a covered calls position by selling Nov2014 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 stock position.

Details of the closed Citigroup transaction and the associated return-on-investment result is as follows:

1.  Citigroup Inc.(C) -- Closed
The transactions were as follows:
09/29/2014 Sold 4 Citigroup Inc. Oct2014 $50.00 Puts @ $.46
Note: The price of Citigroup was $51.69 when this transaction was executed.
10/17/2014 4 Citigroup Puts expired
Note: price of Citi was $50.07 upon Oct2014 expiration

The overall performance result (including commissions) for this Citigroup Inc. transaction was as follows:
100% Cash-Secured Cost Basis: $20,000.00 = $50.00*400
Note:  the price of Citigroup was $51.69 when these Put options were sold.

Net Profit:
(a) Options Income: +$172.05
= ($.46*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (Citi stock remained above $50.00 at Oct2014 expiration): +$0.00
= ($50.00-$50.00)*400 shares

Total Net Profit:+$172.05 
= (+$172.05 +$0.00 +$0.00)

Absolute Return: +0.9%
= +$172.05/$20,000.00
Annualized Return (If C above $50.00 at expiration): +15.7%
= (+$172.05/$20,000.00)*(365/20 days)

Wednesday, October 8, 2014

Established a 100% Cash-Secured Puts Position in Micron Technology Inc.

Just prior to the market close yesterday, the Covered Calls Advisor established a 100% Cash-Secured Puts position in Micron Technology Inc. (Ticker Symbol MU) with an Oct2014 expiration and at the $31.00 strike price.  As detailed below, this investment will provide a +1.4% absolute return in 11 days (which is equivalent to a +47.1% annualized return) if Micron Technology stock remains at or above $31.00 at options expiration on October 17th.

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

Micron Technology Inc. (MU)
The transaction is as follows:
10/07/2014 Sold 4 Micron Technology Inc. Oct2014 $31.00 Puts @ $.47
Note: The price of Micron was $31.93 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: $12,400.00
= $31.00*400
Note:  the price of Micron was $31.93 when these Put options were sold.

Net Profit:
(a) Options Income: +$176.05
= ($.47*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If MU remains above $31.00 at Oct2014 expiration): +$0.00
= ($31.00-$31.00)*400 shares

Total Net Profit (If MU is above $31.00 strike price at Oct2014 options expiration):+$176.05 
= (+$176.05 +$0.00 +$0.00)

Absolute Return (If MU is above $31.00 at Oct2014 options expiration and Put options thus expire worthless): +1.4%
= +$176.05/$12,400.00
Annualized Return (If MU above $31.00 at expiration): +47.1%
= (+$176.05/$12,400.00)*(365/11 days)

The downside 'breakeven price' at expiration is at $30.53 ($31.00 - $.47), which is 4.4% below the current market price of $51.69.
The 'crossover price' at expiration is $32.40 ($31.93 + $.47).  This is the price above which it would have been more profitable to simply buy-and-hold Micron stock until Oct 17th (the Oct2014 options expiration date) rather than holding these short Put options.

Tuesday, October 7, 2014

Established a Second EMC Corp Covered Calls Position

Today, a new covered calls position was established in EMC Corp  (Ticker Symbol EMC).  This is the second EMC covered calls position established at the Covered Calls Advisor Portfolio at the current time.  The prior position was at the $28.00 strike price and with an Oct2014 options expiration, whereas this new position is at the $29.00 strike price and for the Nov2014 expiration.  As shown below, this investment will provide a +2.8% absolute return in 47 days (which is equivalent to a +21.6% annualized return) if EMC stock is unchanged at $28.33 (today's purchase price).  If the stock were to increase above the $29.00 strike price at the Nov2014 expiration, the absolute return would be +5.1% (equivalent to a +39.9% annualized return).

The details of the associated transactions and a potential return-on-investment results are as follows:

1. EMC Corp (EMC)
The transactions were as follows:
10/07/2014 Bought 400 EMC shares @ $28.33
10/07/2014 Sold 4 EMC Nov2014 $29.00 Call Options @ $.84
Note: the price of EMC was $28.48 today when these options were sold.

Two possible overall performance results (including commissions) for these EMC covered calls is as follows:
Stock Purchase Cost: $11,340.95
= ($28.33*400+$8.95 commission)

Net Profit:
(a) Options Income: +$324.05
= 400*$.84 - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EMC price unchanged at $28.33) = -$8.95
= ($28.33-$28.33)*400 - $8.95 commissions; or
(c) Capital Appreciation (If EMC closes above $29.00 strike price) = +$259.05
= ($29.00-$28.33)*400 - $8.95 commissions

1. Total Net Profit (If EMC price unchanged at $28.33): +$315.10
= (+$324.05 +$0.00 -$8.95); or
2. Total Net Profit (If EMC closes above $29.00 strike price at Nov2014 options expiration): +$583.10 = ($324.05+$0.00+$259.05)

1. Absolute Return if Price Unchanged at $28.33: +2.8%
= +$315.10/$11,340.95
Annualized Return If Assigned (ARIA): +21.6%
= (+$315.10/$11,340.95)*(365/47 days)

2. Absolute Return if Assigned (at $29.00 strike price): +5.1%
= +$583.10/$11,340.95
Annualized Return If Assigned (ARIA): +39.9%
= (+$583.10/$11,340.95/$11,316.95)*(365/47 days)

The downside 'breakeven price' at expiration is at $27.49 ($28.33 - $.84), which is 3.0% below the current market price of $28.33.
The 'crossover price' at expiration is $29.17 ($28.33 + $.84). This is the price above which it would have been more profitable to simply buy-and-hold EMC stock until Nov 22nd (the Nov2014 options expiration date) rather than establish this covered calls position.

Thursday, October 2, 2014

Established Covered Calls Position -- EMC Corp

Today, a new covered calls position was established in EMC Corp  (Ticker Symbol EMC).  This EMC position was established at the $28.00 strike price and with an Oct2014 options expiration.  As shown below, this investment will provide a +1.5% absolute return in 17 days (which is equivalent to a +32.5% annualized return) if EMC stock closes at or above $28.00 at options expiration on Oct 18th.

The details of the associated transactions and a potential return-on-investment result are as follows:

1. EMC Corp (EMC)
The transactions were as follows:
10/02/2014 Bought 400 EMC shares @ $28.27
10/02/2014 Sold 4 EMC Oct2014 $28.00 Call Options @ $.75
Note: the price of EMC was $28.27 today when these options were sold.

A possible overall performance result (including commissions) for these EMC covered calls is as follows:
Stock Purchase Cost: $11,316.95
= ($28.27*400+$8.95 commission)

Net Profit:
(a) Options Income: +$288.05
= 400*$.75 - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EMC assigned at $28.00) = -$116.95
= ($28.00-$28.27)*400 - $8.95 commissions

Total Net Profit (If EMC assigned at $28.00): +$171.10
= (+$288.05 +$0.00 -$116.95)

Absolute Return if Assigned (at $28.00): +1.5%
= +$171.10/$11,316.95
Annualized Return If Assigned (ARIA): +32.5%
= (+$171.10/$11,316.95/$11,316.95)*(365/17 days)

The downside 'breakeven price' at expiration is at $27.52 ($28.27 - $.75), which is 2.7% below the current market price of $28.27.
The 'crossover price' at expiration is $29.02 ($28.27 + $.75). This is the price above which it would have been more profitable to simply buy-and-hold EMC stock until Oct 17th (the Oct2014 options expiration date) rather than establish this covered calls position.

Wednesday, October 1, 2014

Established Covered Calls Position -- Chevron Corporation

Today, a new covered calls position was established in Chevron Corporation  (Ticker Symbol CVX).  This Chevron position was established at the $118.00 strike price and with a Nov2014 options expiration.  As shown below, this investment will provide a +1.3% absolute return in 18 days (which is equivalent to a +26.2% annualized return) if Chevron stock closes at or above $118.00 at options expiration on Oct 18th.

The details of the associated transactions and a potential return-on-investment result are as follows:

1. Chevron Corporation (CVX)
The transactions were as follows:
10/01/2014 Bought 300 CVX shares @ $118.54
10/01/2014 Sold 3 CVX Oct2014 $118.00 Call Options @ $2.14
Note: the price of CVX was $118.54 today when these options were sold.

A possible overall performance result (including commissions) for these Chevron covered calls is as follows:
Stock Purchase Cost: $35,570.95
= ($118.54*300+$8.95 commission)

Net Profit:
(a) Options Income: +$630.80
= 300*$2.14 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If CVX assigned at $118.00) = -$170.95
= ($118.00-$118.54)*300 - $8.95 commissions

Total Net Profit (If CVX assigned at $118.00): +$459.85
= (+$630.80 +$0.00 -$170.95)

Absolute Return if Assigned (at $118.00): +1.3%
= +$459.85/$35,570.95
Annualized Return If Assigned (ARIA): +26.2%
= (+$459.85/$35,570.95)*(365/18 days)

The downside 'breakeven price' at expiration is at $116.40 ($118.54 - $2.14), which is 4.7% below the current market price of $118.54.
The 'crossover price' at expiration is $24.089 ($118.54 + $2.14). This is the price above which it would have been more profitable to simply buy-and-hold Chevron stock until Nov 21st (the Nov2014 options expiration date) rather than establish this covered calls position.