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Monday, August 18, 2008

Continuation Transactions -- Honeywell Inc and Petrobras

Today, covered calls positions were established against two companies already owned in the Covered Calls Advisor Portfolio(CCAP). As shown by the transactions history below, the Aug08 options expired worthless and new options were sold today to roll-out to Sep08 covered call positions. As you can see below, both of these positions are currently tracking at a net loss. The Covered Calls Advisor continues to believe in the fundamental value of these companies and therefore is attempting to manage these positions back to profitability.

1. Honeywell(HON) Continuation Transaction

The following transaction was made today to establish a covered calls position against the 500 shares owned in Honeywell(HON):
08/18/08 Covered Calls Continuation Transaction -- STO 5 Sep08 $52.50 Calls @ $1.00

The Transactions History to date is as follows:
05/23/08 Initial Stock Purchase Transaction -- Bought 500 HON @ $58.89
05/23/08 Initial Calls Sold Transaction -- Sold 5 HON Jun08 $60 Calls @ $1.20
06/20/08 Jun08 Options Expired
07/02/08 Covered Calls Continuation Transaction -- Sold 5 Jul08 $52.50 Calls @ $.85
Note: Price of HON was $50.12 when the calls were sold today.
07/19/08 July08 Options Expired
07/24/08 Covered Calls Continuation Transaction -- Sold 5 HON Aug08 $52.50 Calls @ $1.38
Note: Price of HON was $52.02 when the calls were sold today.
08/16/08 Aug08 Options Expired
08/18/08 Covered Calls Continuation Transaction -- STO 5 Sep08 $52.50 Calls @ $1.00
Note: Price of HON was $50.86 when the calls were sold today.

The overall performance results(including commissions) for the HON transactions through the Sep08 expiration would be as follows:
Stock Purchase Cost: $29,453.95
($58.89*500+$8.95 commission)

Net Profit:
(a) Options Income: +$2,164.20 (500*($1.20+$.85+$1.38+$1.00) - 4*$12.70 commissions)
(b) Dividend Income: +$137.50 ($.275 per share*500 shares ex-div on 8/15/08)
(c) Capital Appreciation (If exercised): -$3,177.10
= ($52.50-$58.89)*500 - 2*$8.95 commissions

Total Net Profit(If stock price exercised at $52.50): -$875.40
= (+$2,164.20 +$137.50-$3,177.10)

Annualized Return If Exercised (ARIE) -9.0%
(-$875.40/$29,453.95)*(365/120 days)


2. Petrobras(PBR) Continuation Transaction

The following transaction was made today to establish a covered calls position against the 400 shares owned in Petrobras(PBR):
08/18/08 Covered Calls Continuation Transaction -- STO 4 Sep08 $55.00 Calls @ $.90

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.
08/16/08 Aug08 Options Expired
08/18/08 Covered Calls Continuation Transaction -- STO 4 Sep08 $55.00 Calls @ $.90
Note: Price of PBR was $49.45 when the calls were sold today.

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

Net Profit:
(a) Options Income: +$1,904.15 (400*($2.95+$1.00+$.90) - 3*$11.95 commissions)
(b) Dividend Income: +$0
(c) Capital Appreciation (If exercised): -$2,397.90
= ($55.00-$65.95)*400 - 2*$8.95 commissions

Total Net Profit(If stock price exercised at $60.00): -$493.75
= (+$1,904.15+$0-$2,397.90)

Annualized Return If Exercised (ARIE) -9.1%
(-$493.75/$26,388.95)*(365/75 days)

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