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Wednesday, January 21, 2009

Humana Inc -- Continuation Transaction

The following transaction was made today to establish a covered calls position against the 1000 shares owned in Humana Inc.(HUM):
01/21/09 Sell-to-Open (STO) 10 HUM Feb09 $35s @ $1.40

The Transactions History to date is as follows:
11/24/08 Initial Stock Purchase Transaction -- Bought 1000 HUM @ $25.55
11/24/08 Inital Calls Sold Transaction -- Sold 10 HUM Dec08 $25.00 Calls @ $2.90
Roll-Up-And-Out Spread Transaction:
12/08/08 Buy-to-Close (BTC) 10 HUM Dec08 $25s @ $5.50
12/08/08 Sell-to-Open (STO) 10 HUM Jan09 $30s @ $3.10
Roll-Up Spread Transaction:
12/30/08 Buy-to-Close (BTC) 10 HUM Jan09 $30s @ $5.30
12/30/08 Sell-to-Open (STO) 10 HUM Jan09 $35s @ $1.90
01/17/09 Jan09 Options Expired
01/21/09 Sell-to-Open (STO) 10 HUM Feb09 $35s @ $1.40
Note: Price of HUM was $32.87 when this transaction was executed.


The overall performance results(including commissions) for the HUM transactions are as follows:
Stock Purchase Cost: $25,558.95
($25.55*1000+$8.95 commission)

Net Profit:
(a) Options Income: -$1,565.80 (1000*($2.90-$5.50+$3.10-$5.30+$1.90+$1.40) - 4*$16.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $32.89): +$7,331.05
= ($32.89-$25.55)*1000 - $8.95 commissions
(c) Capital Appreciation (If exercised): +$9,441.05
= ($35.00-$25.55)*1000 - $8.95 commissions

Total Net Profit(If stock price unchanged at $32.87): +$5,765.25
= (-$1,565.80 +$0.00 +$7,331.05)

Total Net Profit(If stock price exercised at $35.00): +$7,875.25
= (-$1,565.80 +$0.00 +$9,441.05)

Annualized Return If Stock Price Unchanged (ARIU) +92.5%
(+$5,765.25/$25,558.95)*(365/89 days)

Annualized Return If Exercised (ARIE) +126.4%
(+$7,875.25/$25,558.95)*(365/89 days)

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