The Covered Calls Advisor Portfolio (CCAP) covered call position in Honeywell(HON) was rolled up today (9/26/07) from the Oct 55s to the Oct 60s. A good-til-cancelled debit limit roll up order was placed at $3.60, and was executed as follows:
Buy-to-Close (BTC) 5 HON Oct 55s @ $4.70
Sell-to-Open (STO) 5 HON Oct 60s @ $1.10
Net Debit on Roll Up $3.60
The ‘net debit to strike price difference ratio’ was 72% [$3.60/($60-$55)], which meets this advisor’s threshold of rolling up only if the ratio is <75%.
A summary of the HON transactions so far is as follows:
Previously: Initial HON post
9/10/07 BTO 500 HON @ $54.23
9/10/07 STO 5 HON Oct 55s @$1.80
Today:
9/26/07 BTC 5 HON Oct 55s @ $4.70
9/26/07 STO 5 HON Oct 60s @ $1.10
Note: HON stock was trading at $59.26 today when the roll up transaction was executed.
The result for the completed Oct 55 covered call position and the status on the newly established Oct 60 covered call position (including commissions) are each summarized below:
(a) Completed Covered Call Position:
Original Stock Investment 9/10/07 – Purchased 500 shares @ $54.23 = ($27,124.95)
Change in Stock Value ($59.26-$54.23)*500 = $2,515.00
Change in Options Value ($913.70-$2,363.70) = -$1,450.00
Net Change ($2,515.00-$1,450.00) = $1,065.00
ANNUALIZED RETURN ON INVESTMENT:
(1,065.00/27,124.95)*(365/14 days) = 102.4%
(b) New Covered Call Position Established:
9/26/07 Retained 500 HON at $59.26 = ($29,630)
9/26/07 Sold 5 OCT07 60 Calls @ $1.10 = $564.95
Annualized Return If Unchanged (ARIU) 28.2%
Annualized Return If Exercised (ARIE) 47.2%
Downside Breakeven Protection 1.9%
