Monday, November 19, 2007

Halliburton and Honeywell -- Continuation Transactions

1. Halliburton (HAL) Continuation Transaction

I confess that I'm not a big fan of the Energy sector right now as it is likely that the price of oil is now peaking in the $95 range and could well hit $70 before it reaches $100. However, I am committed to diversification, so I've decided to retain the HAL holding.

The following transaction was made today to continue the covered calls written against the 700 shares of HAL:
11/19/07 Covered Calls Continuation Transaction -- STO 7 Dec07 37.5 Calls @ $.85

The Transactions History to date is as follows:
10/24/07 Initial Stock Position -- Bought 700 HAL @ 40.01
10/24/07 Initial Call Options -- Sold 7 HAL Nov07 40 Calls @ $1.25
11/17/07 Nov07 Option Expiration Date – HAL closed below the strike price at $37.02
11/19/07 Covered Calls Continuation Transaction -- STO 5 Dec07 37.5 Calls @ $.85

The overall performance results(including commissions)for the HAL transactions through Dec07 expiration would be as follows:
Stock Purchase Cost: $28,016.95
($40.01*700+$9.95 commission)

Net Profit:
(a) Options Income: $1,439.60 (700*$1.25 + 700*.85)
(b) Dividend Income: $63.00 ($.09*700)
(c) Capital Appreciation (If stock price unchanged from $37.02): -$2,112.90
(c) Capital Appreciation (If exercised): -$1,776.90
Total Net Profit(If stock price unchanged at $37.02): -$610.30 ($1,439.60+$63.00-$2,112.90)
Total Net Profit(If stock price exercised at $37.50): -$274.30 ($1,439.60+$63.00-$1,776.90)

Annualized Return If Unchanged (ARIU) -13.5% (-$610.30/$28,016.95)*(365/59)
Annualized Return If Exercised (ARIE) -6.1% (-$274.30/$28,016.95)*(365/59)



2. Honeywell (HON) Continuation Transaction

Each of the last two months the Covered Calls Advisor Portfolio (CCAP) has attempted to roll up to the 60 strike price to get the stock to be called away at 60. The stock has been a yo-yo recently between the 55 and 60 range and is now at the lower end. I remain bullish on the company and am confident the Dave & Dave management team will be successful in achieving their revenue and earnings growth plans; therefore the HON holding is retained.

The following transaction was made today to continue the covered calls written against the 500 shares of HON:
11/19/07 Covered Calls Continuation Transaction -- STO 5 Dec07 57.5 Calls @ $.90

A summary of the HON transactions so far, including today's roll up is as follows:
9/10/07 Initial Stock Position -- BTO 500 HON @ 54.23
9/10/07 Initial Call Options -- STO 5 HON Oct07 55 Calls @ 1.80
9/26/07 Roll Up Transaction -- BTC 5 HON Oct 55s @ $4.70
9/26/07 Roll Up Transaction -- STO 5 HON Oct 60s @ $1.10
10/20/07 Oct07 Option Expiration Date – HON closed below the strike price at $58.32
10/22/07 Covered Calls Continuation Transaction -- STO 5 Nov07 57.5 Calls @ $2.25
10/30/07 Roll Up Transaction -- (BTC) 5 HON Nov 57.5s @ $3.00
10/30/07 Roll Up Transaction -- (STO) 5 HON Nov 60s @ $1.25 The stock was trading at $59.83 when this roll-up transaction was made.
11/16/07 Dividend Received -- 500 @ $.25
11/17/07 Nov07 Option Expiration Date – HON closed below the strike price at $55.88
11/19/07 Covered Calls Continuation Transaction -- STO 5 Dec07 57.5 Calls @ $.90

The overall performance results(including commissions)for the HON transactions through Dec07 expiration would be as follows:
Stock Purchase Cost: $27,124.95
($54.23*500+$9.95 commission)

Net Profit:
(a) Options Income: -$704.80
(b) Dividend Income: $125.00 ($.25*500)
(c) Capital Appreciation (If stock price unchanged from $55.88): $760.10
(c) Capital Appreciation (If exercised): $1,565.10
Total Net Profit(If stock price unchanged at $55.88): $180.30 (-$704.80+$125.00+$760.10)
Total Net Profit(If stock price exercised at $57.50): $985.30 (-$704.80+$125.00+$1,565.10)

Annualized Return If Unchanged (ARIU) 2.4% ($180.30/$27,124.95)*(365/103)
Annualized Return If Exercised (ARIE) 12.9% ($985.30/$27,124.95)*(365/103)

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