Monday, May 18, 2009

Establish Covered Calls Positions -- Hewlett-Packard, iShares MSCI China ETF, and Noble Corp

This past Friday was expiration Friday for May 2009. In this Covered Calls Advisor blog's most recent post, it was noted that of the twelve covered calls positions for May 2009, eight were exercised and the stock was called away. The remaining four May09 positions expired out-of-the-money.

Today it was decided to re-establish covered calls positions in the Covered Calls Advisor Portfolio(CCAP) in three of the eight positions that were called away at May09 expiration; namely Hewlett-Packard(HPQ), iShares MSCI China ETF(FXI), and Noble Corp(NE). The fundamentals for each of these three remain strong, so Jun09 covered calls positions were established as follows:

1. Establish Hewlett-Packard Company(HPQ) Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Hewlett-Packard Company(HPQ) covered calls as follows:

Established Hewlett-Packard Company(HPQ) Covered Calls for Jun09:
05/18/09 Bought 600 HPQ @ $35.28
05/18/09 Sold 6 HPQ Jun09 $36.00 Calls @ $1.40

Some potential results from this Hewlett-Packard covered calls transaction are as follows:

Absolute Return if Unchanged at $35.28: +4.0%
= +$1.40/$35.28
Annualized Return If Unchanged (ARIU): +43.9%
= (+$1.40/$35.28)*(365/33 days)

Absolute Return if Exercised at $36.00: +6.0%
= [$1.40+($36.00-$35.28)]/$35.28
Annualized Return If Exercised (ARIE): +66.5%

Downside Breakeven Price Point: $33.88
Downside Breakeven Protection: 4.0%


2. Establish iShares MSCI China ETF(FXI) Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI China ETF(FXI) covered calls as follows:

Established iShares MSCI China ETF(FXI) Covered Calls for Jun09:
05/18/09 Bought 1500 FXI @ $34.98
05/18/09 Sold 15 FXI Jun09 $35.00 Calls @ $1.75

Some potential results from this iShares MSCI China ETF covered calls transaction are as follows:

Absolute Return if Unchanged at $34.98: +5.0%
= $1.75/$34.98
Annualized Return If Unchanged (ARIU): +55.3%
= ($1.75/$34.98)*(365/33 days)

Absolute Return if Exercised at $35.00: +5.1%
= [$1.75+($35.00-$34.98)]/$34.98
Annualized Return If Exercised (ARIE): +56.0%
= ($1.75+($35.00-$34.98]//$34.98)*(365/33 days)

Downside Breakeven Price Point: $33.23
Downside Breakeven Protection: 5.0%


3. Establish Noble Corp(NE) Covered Calls
A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Noble Corp(NE) covered calls as follows:

Established Noble Corp(NE) Covered Calls for Jun09:
05/18/09 Bought 500 NE @ $29.00
05/18/09 Sold 5 NE Jun09 $27.50 Calls @ $2.52

Some potential results from this Noble Corp covered calls transaction is as follows:

Absolute Return if Exercised at $27.50: +3.5%
= [$2.52+($29.00-$27.50)]/$29.00
Annualized Return If Exercised (ARIE): +38.9%
= ($2.52+($29.00-$27.50])/$34.98)*(365/33 days)

Downside Breakeven Price Point: $26.48
Downside Breakeven Protection: 8.7%

2 comments:

  1. Based on your calls being at the money, or slightly in the money, can I assume that your near term outlook is relatively bearish?

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  2. The Overall Market Meter on the right sidebar shows I'm still 'Slightly Bullish'. There are two new posts today that show six new covered calls positions established: five are out-of-the-money and one is in-the-money. This remains a 'slightly bullish' investment posture.
    Jeff

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