Friday, April 17, 2009

Roll-Up-and-Forward -- Hewlett-Packard Company

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Hewlett-Packard Company (HPQ) was rolled-up-and-forward today (04/17/09) from the Apr09 $32.50s to the May09 $35.00s. The debit-spread transaction was executed as follows:

04/17/09 Buy-to-Close (BTC) 6 HPQ Apr09 $32.50s @ $3.10
04/17/09 Sell-to-Open (STO) 6 HPQ May09 $35.00s @ $1.95
Net Debit-Spread upon Roll-Up-and-Forward was $1.15 ($3.10 - $1.95)
Note: The price of HPQ was $35.55 today when the debit-spread was transacted, so the remaining time-value was only $.05 [$3.10-($35.55-$32.50)] when this transaction was executed.

The transactions history to date is as follows:
01/20/09 Initial Stock Purchase Transaction -- Bought 300 HPQ @ $33.89
01/20/09 Inital Calls Sold Transaction -- Sold 3 HPQ Feb09 $37.50 Calls @ $.80
02/21/09 Feb09 Options Expired
02/25/09 Bought 300 HPQ @ $29.79
02/25/09 Sell-to-Open (STO) 6 HPQ Mar09 $32.50s @ $.55
03/09/09 $48.00 Ex-dividend ($.08 * 600 shares)
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 6 HPQ Apr $32.50s @ $.55
Note: The price of HPQ was $30.24 today when the call options were sold.
Roll-Up-and-Forward debit-spread transaction:
04/17/09 Buy-to-Close (BTC) 6 HPQ Apr09 $32.50s @ $3.10
04/17/09 Sell-to-Open (STO) 6 HPQ May09 $35.00s @ $1.95


The overall performance results(including commissions) for the HPQ transactions are as follows:
Stock Purchase Cost: $19,121.90
($33.89*300+$29.79*300+2*$8.95 commission)

Net Profit:
(a) Options Income: +$158.45 = (300*$.80 + 600*($.55+$.55-$3.10+$1.95) - $51.55 commissions)
(b) Dividend Income: +$48.00
(c) Capital Appreciation (If exercised at $35.00): +$1,887.05
= [$35.00-$31.84(avg cost basis)]*600 - $8.95 commissions

Total Net Profit(If stock price exercised at $35.00): +$2,093.50
= (+$158.45 +$48.00 +$1,887.05)

Absolute Return if Exercised at $35.00: +10.9%
=+$2,093.50/$19,121.90
Annualized Return If Exercised (ARIE) +40.8%
=(+$1,296.95/$19,121.90)*(365/(116+80)/2 days)

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