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Thursday, April 2, 2009

Roll Up -- j2 Global Communications Inc

The Covered Calls Advisor Portfolio (CCAP) covered calls position in j2 Global Communications Inc(JCOM) was rolled-up today (04/02/09) from the Apr09 $20s to the Apr09 $22.50s. The spread transaction was executed as follows:

04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit-Spread upon Roll-Up was $1.90 ($3.10 - $1.20)

The 'Roll-Up Analyzer' worksheet for this transaction is shown below:

The Covered Calls Advisor's key criterion in analyzing whether or not to roll-up to the next strike price is if the potential 'Annualized Return if Stock Price Unchanged' (ARIU) increase is greater than 40%? That is, what is the difference between the ARIU for the remaining 16 days of the current position compared with the ARIU for the remaining 16 days for the proposed new position? In this case, and as shown on the worksheet above, the difference is +59.8%(79.7%-19.9%). Since 59.8% is greater than the 40% threshold, the decision was made to execute the roll-up transaction in this instance. There is confirmation of this decision from the ongoing underlying value in the JCOM stock, which remains buy-rated by both Schwab Equity Ratings and StockGrader.com.

The transactions history to date is as follows:
01/23/09 Initial Stock Purchase Transaction -- Bought 300 JCOM @ $16.76
01/23/09 Inital Calls Sold Transaction -- Sold 3 JCOM Feb09 $17.50 Calls @ $1.00
Roll-Up Spread Transaction:
02/03/09 Buy-to-Close (BTC) 3 JCOM Feb09 $17.5s @ $2.76
02/03/09 Sell-to-Open (STO) 3 JCOM Feb09 $20s @ $1.06
Note: The price of JCOM was $19.90 today when this transaction was executed.
02/21/09 Feb09 Options Expired
02/25/09 Sell-to-Open (STO) 3 JCOM Mar09 $20s @ $.75
Note: JCOM stock was priced at $19.37 today when the calls were sold.
03/21/09 Mar09 Options Expired
03/23/09 Continuation Transaction -- Sell-to-Open (STO) 3 JCOM Apr $20s @ $.90
Note: The price of JCOM was $19.75 today when the call options were sold.
Roll-Up Spread Transaction:
04/02/09 Buy-to-Close (BTC) 3 JCOM Apr09 $20s @ $3.10
04/02/09 Sell-to-Open (STO) 3 JCOM Apr09 $22.50s @ $1.20
Net Debit on Roll Up $1.90 ($3.10 - $1.20)
Note: The price of JCOM was $22.90 today when the roll-up debit-spread transaction was transacted.

The overall performance results(including commissions) for the JCOM transactions through the Apr09 expiration would be as follows:
Stock Purchase Cost: $5,036.95
($16.76*300+$8.95 commission)

Net Profit:
(a) Options Income: -$341.00 (300*($1.00-$2.76+$1.06+$.75+$.90-$3.10+$1.20) - 5*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $22.50): +$1,713.05
= ($22.50-$16.76)*300 - $8.95 commissions

Total Net Profit(If stock price exercised at $22.50): +$1,372.05
= (-$341.00 +$0.00 +$1,713.05)

Absolute Return If Exercised at $22.50 = +27.2%
+$1,372.05/$5,036.95
Annualized Return If Exercised (ARIE) +117.0%
(+$1,372.05/$5,036.95)*(365/85 days)

7 comments:

  1. Jeff,
    Do you have your spreadsheet for the Roll Up in files section of your blog, or on Mike A's site? That we may be able to download and look it over?

    Thanks
    Mike

    ReplyDelete
  2. I just found this blog today.

    Outstanding blog!!!!

    I notice you have 2 different analyzer tables.

    Could you explain the difference between the “Rolling Analyzer” table and the “Roll-Up Analyzer” table?

    ReplyDelete
  3. Mike,

    It seems to me you would have been better off taking your profits at expiration in February and reinvesting them in another opportunity (see table below). Not critizing, just trying to understand your thought process. Greatly respect your knowledge in trading CCs.

    Regards,
    Troy

    Plan 'A' Plan 'B'
    Open Position Date 1/23/2009 1/23/2009
    Close Position Date 2/21/2009 4/18/2009
    Open Stock Price $16.76 $16.76
    Closing Stock Price $17.50 $22.50
    Total Premiums Received $1.00 $(0.95)
    Total Stock Appreciation $0.74 $5.74
    ROIC 10.38% 28.58%
    Annualized ROIC 130.67% 122.73%

    ReplyDelete
  4. Mike and Bosh,
    Thanks for your comments and questions. I would term the Excel workbook used as the Rolling Analyzer. There are two tabs in the workbook: One for potential Roll-Ups and the other for potential Roll-Downs. I consider my current rolling criteria to still be a work-in-progress, so I haven't uploaded it to the Files section of our Yahoo!Groups justcoveredcalls site yet.

    Jeff

    ReplyDelete
  5. Jeff,

    My apologies! For whatever reason I had in my mind that this was Mike's blog. Must have had a gray-haired moment! Thus, I addressed my comment to Mike instead of you.

    Regards,
    Troy

    ReplyDelete
  6. If you want better clarity for the excel snapshot, I would recommend a print screen, then paste in paint, and save as a jpeg.

    ReplyDelete
  7. coverme -- I usually use the EXCEL camera tool instead of a screen print. That way, you can easily limit the picture to the specific range you want the image to be of.

    And I usually save it as a GIF in order to reduce the size. But it can vary from image to image.

    ReplyDelete