Monday, July 20, 2009

Continuation Transactions -- China Mobile, EMCOR Group, and Sohu.com

Last Friday was expiration Friday for July 2009. In a Covered Calls Advisor's blog recent post, it was noted that of the nine covered calls positions for July 2009, four were exercised and the stock was called away. The remaining five July09 positions expired out-of-the-money. Today it was decided to sell one stock (BAC) and to retain three stocks (CHL, EME, and SOHU) and to establish Aug09 covered calls for each one. No decision has been made yet regarding the other holding which is in UNG. The transactions history to date and the profit potential for each of these three 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):
07/20/09 Sell-to-Open (STO) 4 CHL Aug09 $50s @ $2.50
The price of CHL was $50.95 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 closed at $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.
07/18/09 Jul09 Options Expired
The price of CHL closed at $49.81 on expiration Friday.
07/20/09 Sell-to-Open (STO) 4 CHL Aug09 $50s @ $2.50
The price of CHL was $50.95 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: +$1,880.25
= (400*($2.40-$3.70+$.65+$1.25+$1.75+$2.50) - 5*$11.95 commissions)
(b) Dividend Income: +$362.32 ($.9058 * 400 shares)
(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 exercised at $50.00): +$3,973.62
= (+$1,880.25 +$362.32 +$1,731.05)

Absolute Return if Exercised at $50.00: +21.8%
= +$3,973.62/$18,268.95
Annualized Return If Exercised (ARIE): +64.0%
= (+$3,973.62/$18,268.95)*(365/124 days)

2. EMCOR Group Holdings Inc. (EME) -- Continuation Transaction
The following transaction was made today to establish a covered calls position against the 500 shares owned in EMCOR Holdings Inc (EME):
07/20/09 Sell-to-Open (STO) 5 EME Aug09 $20s @ $1.30
The price of EME was $20.04 today when this transaction was executed.

The transactions history to date is as follows:
06/17/09 Bought 500 EME @ $19.81
06/17/09 Sold 5 EME Jul09 $20.00 Calls @ $1.40
07/18/09 Jul09 Options Expired
The price of EME closed at $19.94 on expiration Friday.
07/20/09 Sell-to-Open (STO) 4 EME Aug09 $20s @ $1.30
The price of EME was $20.04 today when this transaction was executed.

The overall performance results(including commissions) for the EME transactions would be as follows:
Stock Purchase Cost: $9,913.95
= ($19.81*500+$8.95 commission)

Net Profit:
(a) Options Income: +$824.60
= (500*($1.40+$1.30) - 2*$12.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $20.00): +$86.05
= ($20.00-$19.81)*500 - $8.95 commissions

Total Net Profit(If stock price exercised at $20.00): +$910.65
= (+824.60 +$0.00 +$86.05)

Absolute Return if Exercised at $20.00: +9.2%
= +$910.65/$9,913.95
Annualized Return If Exercised (ARIE) +50.8%
= (+$910.65/$9,913.95)*(365/66 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):
07/20/09 Sell-to-Open (STO) 4 SOHU Aug09 $65s @ $3.40

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.
07/18/09 Jul09 Options Expired
The price of SOHU closed at $62.00 on expiration Friday.
07/20/09 Sell-to-Open (STO) 4 SOHU Aug09 $65.00s @ $3.40
The price of SOHU was $63.80 today when this transaction was executed.

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: +1,004.25
= (400*($3.00-$5.84+$2.51-$6.15+$2.89+$2.85+$3.40) - 5*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $65.00): +$3,711.05
= ($63.80-$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 $63.80): +$4,715.30
= (+$1,004.25 +$0.00 +$3,711.05)
Total Net Profit(If stock price exercised at $65.00): +$5,196.30
= (+$1,004.25 +$0.00 +$4,191.05)

Absolute Return if Stock Price Unchanged at $63.80: +21.6%
= +$4,715.30/$21,808.95
Annualized Return If Stock Price Unchanged (ARIU): +83.1%
= (+$4,715.30/$21,808.95)*(365/95 days)

Absolute Return if Exercised at $65.00: +23.8%
= +$5,196.30/$21,808.95
Annualized Return If Exercised (ARIE) +91.5%
= (+$5,196.30/$21,808.95)*(365/95 days)

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