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Thursday, April 30, 2009

Bank of America Corp (BAC) -- Closed

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Bank of America(BAC) was closed out today (4/30/09). The federal government's banking stress test results will be released soon. If it is determined that BAC requires additional capital to be raised, that news could have a substantial negative effect on the price of BAC stock. Consequently, with the stock now above the current strike price, it was decided that the current risk/reward position favors taking profits and closing out the BAC covered calls position at this time.

The transactions history was as follows:
03/23/09 Initial Stock Purchase Transaction -- Bought 500 BAC @ $7.16
03/23/09 Inital Calls Sold Transaction -- Sold 5 BAC Apr09 $6.00 Calls @ $1.76
04/09/09 Debit Spread Transaction:
04/09/09 Buy-to-Close (BTC) 5 BAC Apr09 $6.00s @ $3.05
04/09/09 Sell-to-Open (STO) 5 BAC May09 $9.00s @ $1.35
04/30/09 Closing Transaction:
04/30/09 Bought-to-Close 5 BAC May09 $9.00s @ $1.09
04/30/09 Sold 500 BAC @ $9.231

The overall performance results(including commissions) for the BAC transactions are as follows:
Stock Purchase Cost: $3,588.95
($7.16*500+$8.95 commission)

Net Profit:
(a) Options Income: -$540.40 (500*($1.76-$3.05+$1.35-$1.09) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation: +$1,026.55
= ($9.231-$7.16)*500 - $8.95 commissions

Total Net Profit: +$486.15
= (-$540.40 +$0.00 +$1,026.55)

Absolute Return = +13.5%
+$486.15/$3,588.95

Annualized Return: +130.1%
= (+$486.15/$3,588.95)*(365/38 days)

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