A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
RenaissanceRe Holdings Ltd. Covered Calls Established for Jan08
12/27/07 Bought 400 RNR @ $60.64
12/27/07 Sold 4 RNR Jan08 60 Calls @ $2.60
Annualized Return If Unchanged: 54.0%
Annualized Return If Exercised: 54.0%
Downside Breakeven Protection: 4.3%
This will be the only financial sector position in the CCAP for January '08 expiration as I continue to be underweighted in financials. I am very pleased to be able to add this in-the-money covered calls position because of its high potential annualized return (54.0%) -- this return will be achieved even if the stock price declines by up to 0.9% by Jan08 expiration. This return potential for an in-the-money covered call position is exceptional given the relatively low 90-day historic volatility of RNR stock, which is currently at 28.1%.