A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) as follows:
Established Charles Schwab Corp. Covered Calls for Mar08
02/21/08 Bought 1000 SCHW @ $20.10
02/21/08 Sold 10 SCHW Mar08 20 Calls @ $1.05
Annualized Return If Exercised: +57.4%
Downside Breakeven Protection: 5.2%
I expect that SCHW will be the only financial sector position in the CCAP for March08 expiration. Although committed to sector diversification in my investments, I continue to be underweighted in financials at the present time. I am very pleased to be able to add this in-the-money covered calls position because of its high potential annualized return (+57.4%). Schwab continues to experience good growth in client assets, having achieved a 10% increase over the past year. Moreover, client transactions grew by 33% in January08 compared with the previous year (Jan'07). They have no exposure to sub-prime credit risk and the 2007 establishment of the Schwab Bank provides a new and significant catalyst for further client asset growth in 2008.
In the interest of full disclosure, I am a Schwab customer.