Wednesday, June 24, 2009

Continuation Transactions -- China Mobile, iShares MSCI Russell 2000 Small Cap Index ETF and Sohu.com

This past Friday was expiration Friday for June 2009. In this Covered Calls Advisor blog's most recent post, it was noted that of the eleven covered calls positions for June 2009, eight were exercised and the stock was called away. The remaining three June09 positions expired out-of-the-money. Today it was decided to retain the stocks of these three holdings (CHL, IWM, and SOHU) and to establish July09 covered calls for each one. The transactions history to date and the profit potential for each of these companies is detailed below.

1. China Mobile LTD ADR (CHL) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 400 shares owned in China Mobile LTD ADR (CHL):
06/24/09 Sell-to-Open (STO) 4 CHL Jul09 $50s @ $1.75
The price of CHL was $49.75 today when this transaction was executed.

The transactions history to date is as follows:
04/20/09 Initial Stock Purchase Transaction -- Bought 400 CHL @ $45.65
04/20/09 Inital Calls Sold Transaction -- Sold 4 CHL May09 $45.00 Calls @ $2.40
A debit-spread transaction was executed as follows:
05/06/09 Buy-to-Close (BTC) 4 CHL May09 $45s @ $3.70
05/06/09 Sell-to-Open (STO) 4 CHL May09 $50s @ $.65
Note: The price of CHL was $48.51 today when the debit-spread was transacted.
05/11/09 Ex-Div of $362.32($.9058 * 400 shares)
05/16/09 May09 Options Expired
Note: The closing price of CHL was $46.06 on expiration Friday.
05/18/09 Sell-to-Open (STO) 4 CHL Jun09 $50s @ $1.25
Note: The price of CHL was $47.30 today when the call options were sold.
06/20/09 Jun09 Options Expired
06/24/09 Sell-to-Open (STO) 4 CHL Jul09 $50s @ $1.75
The price of CHL was $49.75 today when this transaction was executed.

The overall performance results(including commissions) for the CHL transactions would be as follows:
Stock Purchase Cost: $18,268.95
($45.65*400+$8.95 commission)

Net Profit:
(a) Options Income: +$892.20
= (400*($2.40-$3.70+$.65+$1.25+$1.75) - 4*$11.95 commissions)
(b) Dividend Income: +$362.32 ($.9058 * 400 shares)
(c) Capital Appreciation (If stock price unchanged at $49.75): +$1,631.05
= ($49.75-$45.65)*400 - $8.95 commissions
(c) Capital Appreciation (If exercised at $50.00): +$1,731.05
= ($50.00-$45.65)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $49.75): +$2,885.57
= (+$892.20 +$362.32 +$1,631.05)
Total Net Profit(If stock price exercised at $50.00): +$2,985.57
= (+$892.20 +$362.32 +$1,731.05)

Absolute Return if Stock Price Unchanged at $49.75: +15.8%
= +$2,885.57/$18,268.95
Annualized Return If Stock Price Unchanged (ARIU): +64.8%
= (+$2,885.57/$18,268.95)*(365/89 days)

Absolute Return if Exercised at $50.00: +16.3%
= +$2,985.57/$18,268.95
Annualized Return If Exercised (ARIE): +67.0%
= (+$2,985.57/$18,268.95)*(365/89 days)


2. iShares MSCI Russell 2000 Small Cap Index ETF (IWM) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 500 shares owned in iShares MSCI Russell 2000 Small Cap Index ETF (IWM):
06/24/09 Sell-to-Open (STO) 4 CHL Jul09 $50s @ $1.75
The price of CHL was $49.75 today when this transaction was executed.

The transactions history to date is as follows:
05/21/09 Initial Stock Purchase Transaction -- Bought 500 IWM @ $48.22
05/21/09 Inital Calls Sold Transaction -- Sold 5 IWM Jun09 $47.00 Calls @ $2.87
A roll-up debit-spread transaction was executed as follows:
06/02/09 Buy-to-Close (BTC) 5 IWM Jun09 $47s @ $6.00
06/02/09 Sell-to-Open (STO) 5 IWM Jun09 $53s @ $1.51
Note: The price of IWM was $52.83 today when the debit-spread was transacted.
06/20/09 Jun09 Options Expired
06/24/09 Sell-to-Open (STO) 5 IWM Jul09 $51s @ $1.13
The price of IWM was $50.15 today when this transaction was executed.

The overall performance results(including commissions) for the IWM transactions would be as follows:
Stock Purchase Cost: $24,118.95
= ($48.22*500+$8.95 commission)

Net Profit:
(a) Options Income: -$283.10
= (500*($2.87-$6.00+$1.51+$1.13) - 3*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $50.15): +$956.05
= ($50.15-$48.22)*500 - $8.95 commissions
(c) Capital Appreciation (If exercised at $51.00): +$1,381.05
= ($51.00-$48.22)*500 - $8.95 commissions

Total Net Profit(If stock price unchanged at $50.15): +$672.95
= (-$283.10 +$0.00 +$956.05)
Total Net Profit(If stock price exercised at $51.00): +$1,097.95
= (-$283.10 +$0.00 +$1,381.05)

Absolute Return if Unchanged at $50.15: +2.8%
= +$672.95/$24,118.95
Annualized Return If Unchanged (ARIU) +17.6%
= (+$672.95/$24,118.95)*(365/58 days)

Absolute Return if Exercised at $51.00: +4.6%
= +$1,097.95/$24,118.95
Annualized Return If Exercised (ARIE) +28.6%
= (+$1,097.95/$24,118.95)*(365/58 days)


3. Sohu.com Inc (SOHU) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 400 shares owned in Sohu.com Inc (SOHU):
06/24/09 Sell-to-Open (STO) 4 SOHU Jul09 $65s @ $2.85

The transactions history to date is as follows:
05/19/09 Initial Stock Purchase Transaction -- Bought 400 SOHU @ $54.50
05/19/09 Inital Calls Sold Transaction -- Sold 4 SOHU Jun09 $55.00 Calls @ $3.00
A debit-spread transaction was executed as follows:
05/29/09 Buy-to-Close (BTC) 4 SOHU Jun09 $55s @ $5.84
05/29/09 Sell-to-Open (STO) 4 SOHU Jun09 $60s @ $2.51
Note: The price of SOHU was $59.85 today when the debit-spread was transacted.
06/03/09 Buy-to-Close (BTC) 4 SOHU Jun09 $60s @ $6.15
06/03/09 Sell-to-Open (STO) 4 SOHU Jun09 $65s @ $2.89
Note: The price of SOHU was $65.02 today when the debit-spread was transacted.
06/20/09 Jun09 Options Expired
06/24/09 Sell-to-Open (STO) 4 SOHU Jul09 $65s @ $2.85
Note: The price of SOHU was $64.60 today when the debit-spread was transacted.

The overall performance results(including commissions) for this SOHU covered calls position would be as follows:
Stock Purchase Cost: $21,808.95
($54.50*400+$8.95 commission)

Net Profit:
(a) Options Income: -$343.80
= (400*($3.00-$5.84+$2.51-$6.15+$2.89+$2.85) - 4*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $64.60): +$4,031.05
= ($64.60-$54.50)*400 - $8.95 commissions
(c) Capital Appreciation (If exercised at $65.00): +$4,191.05
= ($65.00-$54.50)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $64.60): +$3,687.25
= (-$343.80 +$0.00 +$4,031.05)
Total Net Profit(If stock price exercised at $65.00): +$3,847.25
= (-$343.80 +$0.00 +$4,191.05)

Absolute Return if Stock Price Unchanged at $64.60: +16.9%
= +$3,687.25/$21,808.95
Annualized Return If Stock Price Unchanged (ARIU): +102.9%
= (+$3,687.25/$21,808.95)*(365/60 days)

Absolute Return if Exercised at $65.00: +17.6%
= +$3,847.25/$21,808.95
Annualized Return If Exercised (ARIE) +107.3%
= (+$3,847.25/$21,808.95)*(365/60 days)

1 comment:

  1. Jeff, I must have missed one of the educational pieces - why buy 1200 FXI but only 400 SOHU? Those are just examples of the different amounts purchased over the six months or so that I've been watching this blog.

    Thanks,
    Bill

    ReplyDelete