Monday, April 20, 2009

Establish China Mobile LTD ADR Covered Calls

A new covered call position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of China Mobile LTD ADR (CHL) covered calls. China Mobile is the one of the world's largest companies with a current market capitaliziation of $183 billion. It is by far the world's largest mobile telecommunications service provider with 464 million subscribers in China, and it continues to experience significant sequential quarterly subscriber growth.

You might recall that this Advisor had an Apr09 covered calls position in CHL which was assigned at Apr09 expiration last Friday. Because CHL continues to rate very highly on the CCAP 'Buy Alerts' spreadsheet, it was decided to re-establish a covered calls position in CHL with a May09 expiration. A summary of the transactions today is as follows:

Established China Mobile LTD ADR Covered Calls for May09:
04/20/09 Bought 400 CHL @ $45.65
04/20/09 Sold 4 CHL May09 $45.00 Calls @ $2.40

Absolute Return if Exercised (at $45.00 on May 16th expiration date): +5.8%
= ($2.40-($45.65-$45.00)+$.9058 ex-div)/$45.65
Annualized Return If Exercised (ARIE): +81.6%
Downside Breakeven Price Point: $42.3442
Downside Breakeven Protection: 7.2%
Note: Since there is a $.9058 ex-div scheduled for 5/11, if the stock is in-the-money on 5/10 and the time-value remaining in the call option is greater than $.9058, then it would be expected that the call would be exercised early and the stock called away on 5/10 at the $45.00 strike price. In this event, the annualized return achieved would still be a very attractive 69.9%.

1 comment:

  1. Like your China Mobile pick. Might just do something similar with that one myself.

    Best Regards,
    Troy

    ReplyDelete