Wednesday, July 30, 2008

Continuation Transaction -- Petroleo Brasileiro ADR (Petrobras)

The following transaction was made today to establish a covered calls position against the 400 shares owned in PBR:
07/30/08 Covered Calls Transaction -- STO 4 Aug08 $60.00 Calls @ $1.00

The Transactions History to date is as follows:
07/07/08 Initial Stock Purchase Transaction -- Bought 400 PBR @ $65.95
07/07/08 Initial Calls Sold Transaction -- Sold 4 PBR Jul08 $65.00 Calls @ $2.95
07/19/08 July08 Options Expired
07/24/08 Covered Calls Continuation Transaction -- Sold 4 PBR Aug08 $60.00 Calls @ $1.00
Note: Price of PBR was $56.86 at the time when the calls were sold today.

The overall performance results(including commissions) for the PBR transactions through the Aug08 expiration would be as follows:
Stock Purchase Cost: $26,388.95
($65.95*500+$8.95 commission)

Net Profit:
(a) Options Income: +$1,556.10 (400*($2.95+$1.00) - 2*$11.95 commissions)
(b) Dividend Income: +$0
(c) Capital Appreciation (If exercised): -$2,397.90
= ($60.00-$65.95)*400 - 2*$8.95 commissions

Total Net Profit(If stock price exercised at $60.00): -$841.80
= (+$1,556.10+$0-$2,397.90)

Annualized Return If Exercised (ARIE) -29.1%
(-$841.80/$26,388.95)*(365/40 days)