The Covered Calls Advisor Portfolio (CCAP) has substantially outperformed the Russell 3000 benchmark so far in 2009. Selling call options against our stock holdings provides us covered calls investors with a clear relative advantage over the typical buy-and-hold investor; this is especially true during bearish markets (such as we are currently experiencing) as well as during range-bound markets.
Below is the Covered Calls Advisor Portfolio results for January and February 2009 year-to-date. First, a single performance measure is used to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. A simple example demonstrates how it is calculated:
If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.
1. February 2009 Year-to-Date Results:
CCAP Absolute Return (Jan 1st through Feb 28th, 2009) = -7.35%
Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Feb 28th,2009) = -17.98%
Although negative, the CCAP has performed substantially better than the Russell 3000 benchmark thus far in 2009.
2. Prior Years Results:
The Covered Calls Advisor Portfolio (CCAP) was begun in September, 2007. The annualized returns achieved for 2007 and 2008 compared with the Russell 3000 benchmark results were as follows:
For establishing new covered calls positions at this time, the Covered Calls Advisor's Overall Market Meter (shown in the right sidebar near the top of this page) shows that a SLIGHTLY BULLISH investment posture is recommended.
The corresponding covered calls investing approach is to write near-month primarily slightly out-of-the-money covered calls. By 'slightly out-of-the-money', this advisor means that for a covered calls portfolio, on average covered calls positions should be established somewhere between 1.0% and 2.5% below the strike price.