Thursday, March 19, 2009

Roll-Up-and-Forward -- UnitedHealth Group Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in UnitedHealth Group Inc(UNH) was rolled-up-and-forward today (03/19/09) from the Mar09 $19.00s to the Apr09 $22.00s.

The spread transaction was executed as follows:
03/19/09 Buy-to-Close (BTC) 3 UNH Mar09 $19.00s @ $3.05
03/19/09 Sell-to-Open (STO) 3 UNH Apr09 $45s @ $1.75
Net Debit on Roll Up $1.30 ($3.05-$1.75)
This roll-up option spread was entered as a good-til-cancelled limit order with a spread of $1.30. The order was executed today when the price of UNH stock was at $21.88.

The Transactions History to date for the UNH covered calls is as follows:
03/10/09 Bought 300 UNH @ $18.96
03/10/09 Sold 3 UNH Mar09 $19.00 Calls @ $1.20
03/19/09 Buy-to-Close (BTC) 3 UNH Mar09 $19.00s @ $3.05
03/19/09 Sell-to-Open (STO) 3 UNH Apr09 $45s @ $1.75
Net Debit on Roll Up $1.30 ($3.05-$1.75)
03/31/09 $9.00 Ex-Dividend ($.03*300 shares)

The overall performance results(including commissions) for the UNH transactions through the Apr09 expiration would be as follows:

Stock Purchase Cost: $5,696.95
($18.96*300+$8.95 commission)

Net Profit:
(a) Options Income: -$52.40 (300*($1.20-$3.05+$1.75) - 2*$11.20 commissions)
(b) Dividend Income: +$9.00
(c) Capital Appreciation (If stock price unchanged at $21.88): +$867.05
= ($21.88-$18.96)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $22.00): +$903.05
= ($22.00-$18.96)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $21.88): +$823.65
= (-$52.40 +$9.00 +$867.05)
Total Net Profit(If stock price exercised at $22.00): +$859.65
= (-$52.40 +$9.00 +$903.05)

Absolute Return If Stock Price Unchanged at $21.88 (ARIU) = +14.5%
+$823.65/$5,696.95
Annualized Return If Unchanged (ARIU) +135.3%
(+$823.65/$5,696.95)*(365/39 days)
Absolute Return If Exercised = +15.1%
+$859.65/$5,696.95
Annualized Return If Exercised (ARIE) +141.2%
(+$859.65/$5,696.95)*(365/39 days)