Wednesday, January 21, 2009

Establish iShares Russell 2000 Value Index ETF Covered Calls


A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares Russell 2000 Value Index ETF (IWN) covered calls.

The iShares Russell 2000 Value Index ETF (ticker symbol IWN) is an index fund that represents the small cap sector of the U.S. equity market. The companies in the index are those approximately two-thirds of the Russell 2000 companies with the lower price-to-book value ratios. This ETF was selected in order to obtain additional portfolio diversification in the Covered Calls Advisor Portfolio through greater exposure to small cap companies. Also, historically, small cap stocks have slightly outperformed large cap stocks and value-oriented stocks have outperformed growth-oriented stocks.

Established iShares Russell 2000 Value Index ETF Covered Calls for Feb09:
01/21/09 Bought 300 IWN @ $42.56
01/21/09 Sold 3 IWN Feb09 $45.00 Calls @ $1.60

Absolute Return if Unchanged: +3.8%
Annualized Return If Unchanged (ARIU): +44.2%
Absolute Return if Exercised: +9.5%
Annualized Return If Exercised (ARIE): +111.8%
Downside Breakeven Price Point: $40.96
Downside Breakeven Protection: 3.8%

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